Intense focus on cutting emissions is dumb argues Lomborg
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The quality and range of the free lectures at the LSE is hard to beat and half term has given me the chance to pop into several this week. I attended a public seminar on climate change at the London School of Economics last night where the principal speaker was the Skepical Environmentalist Bjorn Lomborg - adjunct professor at the Copenhagen Business School.
Once this guy gets going he is difficult to hold back! A relentless delivery was tough to stay with after a busy day in London. I have heard Bjorn Lomborg before and didn’t learn too much that was fresh but it was useful once more to draw a contrarian view on the intense policy focus on cutting C02 emissions as the centre-piece of environmental policy. His new film “Cool It” is released in the UK next month (March 2011) and will no doubt stoke fresh media interest.
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Combining monetary and fiscal policy to curb inflation in China
Inflation is rising in China, and many of the reasons are the same as those given by Mervyn King for the rise in the UK - food prices are up 10.3% and the producer price index has risen to 6.6%, giving an annual inflation rate of 4.9% in January.
This is in spite of three interest rate rises in the last four months, and has brought about a further rise from 5.81% to 6.06% by the Central Bank.
The growth of the property owning middle class is recognised as having a role here - the National Bureau of Statistics also announced changes in how it calculates consumer price inflation.
In spite of the fact that there is still a huge proportion of the population who live on a very low income, and poor families spend up to half their incomes on food, housing has now been given a much larger share of the new consumer price index (CPI) basket, and food prices have been given less weight, it said.
read more...»Economics solar power government subsidies
A timely and relevant video here on the economics of the government feed-in-tariffs (or subsidies) for companies and individuals putting up solar panels on their roofs. Solar power is an industry booming with over 10,000 installations in the first six months since housing associations were given subsidies to install solar panels in many of their properties. The video looks at the costs of installment of a system and the electricity it generates and how much extra electricity is generated into the national grid. How important will solar power be in promoting energy independence? Peak solar output from the UK does not correspond with peak demand for electricity (from 5pm to 7pm on a winter’s evening). How many of the solar panels are made in the UK? Who really benefits from feed-in-tariffs? Rather like the CAP are the major commercial benefits skewed to large businesses willing to put up big-scale solar installations in empty fields?
High taxes stimulate rise in smuggling of cigarettes
One of the unintended consequences of the steep rise in the real price of cigarettes in the UK is the strong incentive to bring contraband cigarettes into the UK from elsewhere in the EU single market.
This Guardian article reports on the expected rise in smuggling as cigarette duties reach fresh highs in 2011. The average price of a pack of 20 cigarettes reached £6.29 in the UK last summer, compared with £2.80 in Spain and £1.57 in Poland.
EU Economics: Hopes for a low carbon future in Europe
With EU carbon emissions market has closed since the middle of January after hackers stole €30m of permits the economics of a EU wide carbon tax has been given fresh prominence in recent weeks. Charles Hart evaluates the arguments for and against a tax on emissions in this super applied micro essay. After the essay there are some links to recent blog posts and other resources on carbon trading and carbon taxation.
read more...»The ethics of paying to pollute
Here is a thought-provoking piece from the BBC web site on ethical dimensions to policies such as carbon trading and carbon taxation. Aristotle on modern ethical dilemmas
The Externalities of Plastic
A hat tip to Mark Seccombe for suggesting these resources on the externalities of plastic waste - very timely as many teachers get stuck into aspects of market failure and sustainability with their AS students.
I came across this video which would be a good little clip to introduce negative externalities on both the production and consumption side. It would also reinforce the difficulties of putting monetary values on externalities. The first half is better for Economics, the second half drifts into sociological comment.
It could be supported by this cracking site on plastic bag usage. This article considers plant based plastics as a way forward, it could be good example of weighing up costs and benefits – the second-to-last paragraph has some good stuff from a business point of view.
read more...»Economics Q&A: Tragedy of the Commons and Market Failure
‘The tragedy of the commons’, although created by Garrett Hardin, is a famous concept which can be traced back to Adam Smith. It refers to a situation where individuals or private economic agents exploit scarce and rival common environmental resources for their own rational, self-interested aims, leading to over-production and the possible permanent depletion of the resource for all.
The essence of this problem stems from insufficient and poorly protected property rights. In other words, as consumers do not own these common goods, they have little incentive to take care of and maintain it, but rather an incentive to extract as much personal utility or benefit from it as possible at that particular time. Therefore, the provision of property rights over some grazing land may help to prevent it being permanently destroyed – instead allowing utility to be extracted from it at a sustainable rate. However, as the tragedy of the commons is a problem where one’s actions affect the benefits of others in the future, concerns for intergenerational equity usually end up being dominated by concerns for personal benefits.
read more...»Roger Harrabin - Environmental Economics Videos
I am a big fan of the journalistic work of Roger Harrabin at the BBC. Here is a nap hand selection of five recent video pieces on environmental issues focusing on emissions issues and policies in developed and developing countries.
read more...»Environmental Economics: Five Fresh Links
Here are five links to stories and issues connected to environmental economics - we are embarking on a study of this for our A2 microeconomics
read more...»Chinese exports mini-fact
The Christmas edition of The Week magazine has a selection of Statistics of the Year which have been published during 2010 and I like this one from Prospect Magazine - China now exports as much every six hours as it did in the whole of 1978. Could be used to illustrate the speed of growth of trade with the rest of the world?
read more...»Trees as private and public goods
Nancy Folbre an economics professor at the University of Massachusetts Amherst provides in this short article from the New York Times a beautifully clear explanation of the economics of deforestation and the tragedy of the commons. A superb article to print out and use when studying the motives of individuals within society and ideas for how social norms and local institutions really do matter when putting together policies to reduce global deforestation. Read Tree-economics
CBA and bad weather
Here is the link to a good piece from Channel 4 news on cost benefit analysis relating to the travel chaos that has affected the UK this week. Costs might include investment in a new supercomputer to track weather patterns, more robust real time travel information systems, more de-icing vehicles at airports, or upgrades in rail tracks. But I wonder how we place a value on families being reunited at Christmas?
Demerit good: Gaming
The nature of demerit and merit goods are such that it enters the realm of normative economics. That is, one government or society may deem something to be a demerit good whilst others do not. Cigarettes are undoubtedly a more demerit good these days than they were in 1940.
Last night’s documentary from Panorama highlighted the 21st century demerit good: Gaming.
The Addicted to games? documentary explores the dangerous side to those who play computer games for 16 hours a day.
Promising news on deforestation
There is better news on progress being made by the Brazilian government in reducing the annual toll of deforestation in the Amazon. Better surveillance, tougher penalties and more effective incentives all have a role to play.
The unkindest cut of all?
Opportunity costs – can a local authority afford to spend £21,000 a year on keeping 3 public toilets open, when their budget has already been cut by £220,000 and they are expecting a further 27% cut, already announced in the spending review? My local council, Epsom and Ewell, has decided not, as they need the money in order to maintain other services, particularly personal care services to the elderly in the borough. But, in order to avoid the negative externalities that could be associated with removal of a quasi-public good like public conveniences, they are seeking some alternative provision for the ‘emergency needs’ that they were there for – they are negotiating with local businesses to allow the public use of their facilities. Now that sounds like an excellent example of improving capacity utilisation, combined with David Cameron’s Big Society!
The cost of damaging Planet Earth
A recent, two-year study for the United Nations Environment Programme, entitled The Economics of Ecosystems and Biodiversity (Teeb), put the damage done to the natural world by human activity in 2008 at between $2tn (£1.3tn) and $4.5tn. The loss of bio-diversity is a key element of this environmental impact.
At the lower estimate, that is roughly equivalent to the entire annual economic output of the UK or Italy.
In the US in 2007, for example, the cost to farmers of a collapse in the number of bees was $15bn, according to the US Department of Agriculture, contributing to a global cost of pollination services of $190bn, according to Teeb. More here from their website.
In 1998, flash flooding in the Yangtze River in China killed more than 4,000 people, displaced millions more and caused damage estimated at $30bn.
Read more here. The Independent also has a superb feature on this issue. Living Planet: The world is not enough
Recovery at any cost?
With the Government cutting public spending, growth in the economy will have to come from the private sector. But businesses are only going to increase output if someone wants to buy it. So we have to start spending.
read more...»Positive externalities from dog ownership?
Evidence here that dog ownership reduces the risk of obesity and early signs of diabetes among the young…... to which we can add the well known positive effects as an anti-depressant for many of the elderly for whom dogs are incredibly important forms of companionship. On the flip side, I wonder how high is the canine carbon pawprint? A medium-sized dog eats around 360 pounds of meat and over 209 pounds of cereal a year…..
Greece smoking ban
A new law has come into force this week in Greece banning smoking in enclosed public spaces and tobacco advertising.
It is estimated that more than 40% of Greek adults smoke - well above the EU’s average of 29% - which is perhaps why at a time of fiscal austerity, it is surprising/impressive that the Greek government have pursued this policy. Cigarettes bring in a significant amount of tax revenue (either via indirect or corporation taxes) which will be lost. But then maybe it will save a lot more money via its health bill. (or maybe they are just hoping people will flaunt the rules and collect fines!).
Having said this, this latest attempt to stop smokers, is its 4th attempt in a decade - following a tobacco ban in public places on July 1 of this year too. The demand for habit-forming goods is too inelastic to go away overnight…
Recycling waste - goodbye stick, hello carrot
The proposal for a pay as you throw charge for collecting household waste is being abandoned by the new government as they turn instead to positive incentives for people to increase recycling rates. This BBC news article provides the background. Gradually the percentage of household waste that is being recycled after collection is rising.
But there are enormous differences in recycle rates across the country and also variations in what is being collected. According to the article, almost 37% of home rubbish was recycled in England in 2008/09 - up from 34.5% the previous year and a massive increase since 2000/01 when only 11.2% was recycled - the top performer was 62% in Staffordshire Moorlands compared to just 15% in Newham, London.
Will rewards instead of charges nudge people into making changes to their behaviour? Positive rewards within a voluntary system seems to have worked well in my local borough of Windsor and Maidenhead. Can it be rolled out across the country? Beware the law of unintended consequences!
Remember though that recycling is just one part of this issue. Cutting the amount of waste in the first place is hugely important and here both consumers and producers have important roles to play.
On the Daily Politics show Giles Dilnot reports on plans to end the bin tax
Diagio opposes minimum alcohol price
This is a useful video resource to have up your sleeve when teaching minimum alcohol prices and the view taken by one of the stakeholders - the drinks manufacturers themselves.
Economics of the EU Revision - Carbon Taxes
Revision notes on carbon taxation in an EU context
read more...»A Fun Way to Get People to Obey Speed Limits
A lovely idea to nudge people to obey speed limits!
read more...»TV Time!
Lots of Economics on TV this weekend:
read more...»Cheryl Cole - negative externality?
A good example when teaching negative externalities and lack of compensation for 3rd parties…
The Economics of Cloud Computing and E-waste
Here is a thorough and well written explanation of some of the likely economic effects of the rapid expansion of on-demand cloud computing services. Most of the major players (Google, Amazon, Microsoft et al) are investing huge amounts in building up their server infrastructure to cope with the likely demand for cloud-based computing services. The article explores some of the positive externalities that might result from a move to the cloud and also possible effects on market structures as IT entry barriers for small to medium sized businesses are reduced.
“One of the main obstacles to entry in new markets is represented by the high up-front costs of entry, often associated with physical and IT capital spending. Cloud computing allows potential entrants to save in the fixed costs associated with hardware and software adoption”
For an alternative perspective, the Independent yesterday carried a feature on the externalities of e-waste - a good example to use of some of the external costs of the super-charged growth of IT services.
“The United Nations Environment Programme (UNEP) estimated that, worldwide, between 20 and 50 million tonnes of electrical and electronic goods which had come to the end of their lives were being thrown away every year. The latest UNEP report now estimates the annual total at 40 billion tonnes, with America in the lead, producing 3m tonnes domestically every year, followed by China with 2.3m tonnes.”
Revision Presentation - Positive Externalities
In this revision presentation we take a look at positive externalities:
Launch interactive revision presentation on positive externalities
New House of Commons research report on carbon trading
Published at the end of January 2010 I came across this excellent report whilst researching an updated presentation on carbon trading and carbon taxes. The hmtl version of the report from the House of Commons Environmental Audit Commission can be found here. The role of carbon markets in preventing dangerous climage change
Here are some additional links to useful recent news articles and resources on carbon trading and carbon pricing:
read more...»Revision Presentation - Market Failure & the Environment
This new revision presentation examines the concept of market failure in the context of the environment.
Launch interactive version of Environmental Market Failure and Policy Options
Download printable handouts (pdf)
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