Estimates of climate change damage are central to the design of climate policies. Here, we develop a flexible architecture for computing damages that integrates climate science, econometric analyses, and process models. We use this approach to construct spatially explicit, probabilistic, and empirically derived estimates of economic damage in the United States from climate change. The combined value of market and nonmarket damage across analyzed sectors—agriculture, crime, coastal storms, energy, human mortality, and labor—increases quadratically in global mean temperature, costing roughly 1.2% of gross domestic product per +1°C on average. Importantly, risk is distributed unequally across locations, generating a large transfer of value northward and westward that increases economic inequality. By the late 21st century, the poorest third of counties are projected to experience damages between 2 and 20% of county income (90% chance) under business-as-usual emissions (Representative Concentration Pathway 8.5).
Here's a pretty picture (with a really long caption) that sums things up:
Caption: County-level median values for average 2080 to 2099 RCP8.5 impacts. Impacts are changes relative to counterfactual “no additional climate change” trajectories. Color indicates magnitude of impact in median projection; outline color indicates level of agreement across projections (thin white outline, inner 66% of projections disagree in sign; no outline, ≥83% of projections agree in sign; black outline, ≥95% agree in sign; thick white outline, state borders; maps without outlines shown in fig. S2). Negative damages indicate economic gains. (A) Percent change in yields, area-weighted average for maize, wheat, soybeans, and cotton. (B) Change in all-cause mortality rates, across all age groups. (C) Change in electricity demand. (D) Change in labor supply of full-time-equivalent workers for low-risk jobs where workers are minimally exposed to outdoor temperature. (E) Same as (D), except for high-risk jobs where workers are heavily exposed to outdoor temperatures. (F) Change in damages from coastal storms. (G) Change in property-crime rates. (H) Change in violent-crime rates. (I) Median total direct economic damage across all sectors [(A) to (H)].
Env-Econ Summary: We're all screwed, just some of us are screwed more than others.
Quite possibly the most depressing introduction to a pseudo-academic workshop I have seen:
How can we best live at this moment of severe environmental degradation? How can we work and teach on behalf of environmental wellbeing without becoming overwhelmed, embittered, or burned out? Is there a way to thrive in our environmental commitments?
This workshop brings together professors and activists to develop more skillful ways of confronting environmental challenges. Specifically, it explores the role of contemplative practice in our pedagogical and activist efforts. Through daily meditation, journal writing, nature walks, and other reflective exercises as well as scholarly discussion, we will probe the depths of the environmental crisis and develop resources to work and teach on behalf of global sustainability.
Environmental issues are not simply political, technological, or economic dilemmas but also existential challenges that require us to reflect upon the meaning of our individual and collective lives. Furthermore, the scale and pace of environmental degradation call on us to enhance our skills as educators, activists, and ordinary citizens like never before. This workshop offers the opportunity to deepen such efforts by facilitating meaningful dialogue between activists and professors, probing the interface between our personal and professional lives, and introducing contemplative practices tailored specifically for use in the classroom and in political organizing.
Part seminar and part retreat, the workshop provides the chance to step back from our frenetic lives and, in the midst of stunning beauty and a supportive community, integrate our deepest spiritual yearnings with our professional and personal commitments to protect the earth.
The Department of Agricultural, Environmental, and Development Economics (my department) in the College of Food, Agricultural and Environmental Sciences (my college) at The Ohio State University (my university) is hiring for four new faculty positions--and I am not ashamed of taking advantage of this blog to promote the positions. If you have (or are close to earning) a PhD with interests in agricultural economics, environmental economics, regional economics, development economics or some combination of those fields along with other interests, then we can probably align your interests with one of our four positions.
Assistant or Associate Professor in Global Economic Modeling: a tenure-track assistant/associate professor position in the area of global economic modeling and integrated assessment. Economic modeling approaches of particular interest include dynamic optimization and computable general equilibrium modeling, as well as familiarity with approaches for handling decision making under uncertainty. Individuals with experience integrating economic models with physical/biological models are encouraged to apply.
Assistant Professor in Agribusiness: a tenure-track assistant professor with teaching and research responsibilities in agribusiness. Applicants with interests in agricultural markets and marketing, finance, supply and demand analysis, industrial organization, international trade or agricultural and food policy, that complement a primary interest in agribusiness are encouraged to apply.
Assistant or Associate Professor in Sustainable Development and Economy: an assistant/associate professor, tenure-track position to develop an internationally recognized program of research and teaching focused on sustainable development and the trade-offs among economic development, social equity and environmental protection in international or regional contexts. Areas of interest include, but are not limited to: economic growth; equity; resource use; technological change; socio-ecological systems; sustainable and resilient communities.
Click on the links for full descriptions and application info.
Last week I mentioned I mentioned that I would be presenting (yesterday) to The Ohio State University Environmental Professionals Network Breakfast Club on the topic of "Ohio's Water Resources and Citizens at Risk - Ag-related Practices and Policies to Prevent Harmful Algal Blooms, Post-Toledo." I (along with each of two other panel members) was given 5 minutes to give opening remarks before moderator driven Q&A. Rather than my normal rambling unstructured style of presentation, I decided to give a speech--which means actually writing a speech. So here is the speech I gave (speech I read is probably a better way of putting it) to a audience of 230 representatives of ag and non ag sectors. I'm told there will be video at some point. I will let you know if video emerges--provided it doesn't make me look like a complete bungling idiot.
We’ve heard a lot today about solutions for high phosphorous loads in Lake Erie and the resulting harmful algal blooms. As an environmental economist, I’m told my role in this discussion is to provide a balanced look at the potential costs of reducing phosphorous loadings into Lake Erie, the benefits of those reductions to society, and the burden of the costs of phosphorous reductions.
Some of you may be wondering, what is an environmental economist? An environmental economist is an economist who applies the science of economics to environmental issues. I am not an environmentalist. Don’t get me wrong, I care about the environment. But I am realistic about the role that incentives, trade-offs, and profits play in finding solutions to environmental issues that lead to sustainable human well-being. I recognize the reality that the economy and the natural environment are inextricably linked and attempting to separate the study of each creates a situation in which neither is sustainable. Economic, social and environmental sustainability requires the realization that no single solution exists.
So what then, from my perspective as an environmental economist, is the fundamental issue surrounding harmful algal blooms? Excess nutrient loads into Lake Erie are the result of misalignment of incentives. The profit incentives of the on-farm sector fail to fully capture the costs of nutrient application decisions to the non-agricultural sectors. The cost-savings incentives of industrial and municipal sources of run-off fail to fully capture the downstream costs of urban run-off. The consume-now incentive of today’s consumers fails to fully capture the cost of today’s decisions on future generations.
None of these statements are judgments on the intent of individual farmers, or municipal decision makers or society today in making decisions that impose excess costs on others. In fact, in my experience, most people want to do the right thing. Farmers care about environmental issues. Municipalities care about water quality. Today’s generation cares about the future. Yet when consumption and production decisions are made, reality differs from intent.
For example, when I drove here this morning, I gave no thought to the cost my car exhaust imposes on others. I know that my exhaust contributes to increased atmospheric pollution. I know that by driving I increase the likelihood of health issues for those with breathing issues. I know that my driving contributes to long-term climate change. Yet, other than being a genuinely nice person, I have no incentive to incorporate those external costs into my driving decisions. The price of driving does not fully reflect the external costs.
Prices are the economy’s rationing mechanism. It is prices that drive economic decisions. Prices provide signals. It’s prices that serve as a market’s way of reflecting the value of something. And if prices fail to fully reflect the current and future costs and benefits of production and consumption, markets will misallocate society’s scarce resources.
In political and social discussions we hear a lot of talk about the need for less government regulation, the need for free markets. In general I agree with free market advocates. But in order for a market to do its job of allocating society’s scarce resources today and into the future, that market must capture ALL costs and benefits. Otherwise a market is not truly a free market.
In the case of the environment, we can think of the problem as one of the failure of markets to properly price the services the environment supplies. In effect, the environment is treated as a free input in production and consumption. It is only natural that if something is free we will use more than we would if it were priced at its true value. If gas were free, I would use a lot more of it.
Because the cost of environmental degradation is not captured in markets, we use more of it than we would otherwise. It might be tempting then to conclude that markets are the problem. I agree to a certain extent. Markets are failing to properly account for costs and benefits. But markets are also the solution.
To solve the harmful algal bloom problem, we need to find ways to better capture the external costs of using nitrogen and phosphorous in the markets in which they are used—and then allow the resulting incentives to work to solve the problem. To do so, we can focus on the quantity of phosphorous, or we can focus on the price. Quantity restrictions are effective if monitored effectively, but effective monitoring is difficult. Effective quantity restrictions will reflect in market prices. However, ill-designed quantity restrictions can result in regulatory costs that are higher than needed.
Regulating prices, on the other hand, allow the users to make decisions that reduce their own costs. By allowing the freedom to choose how to adapt to higher prices, price-based policies can achieve the same outcomes as quantity restrictions at lower cost. Prices also provide incentives for innovation. As prices rise to reflect the full costs, users will have the incentive to find lower cost alternatives. New investments in research and development will lead to new lower-cost technologies. Market-based price regulations allow the market to allocate society’s scarce resources efficiently.
However, many price-based solutions have a negative reputation. As I mention each of these, I’m sure each will garner some sort of negative reaction: taxes, subsidies, cap and trade, user fees. But as an environmental economist, I recognize that solutions that build environmental costs into market decisions allow individuals to make the decisions that are in their own best interest. The result is what’s best for society.
Unfortunately, we are talking about a problem of magnitude that hoping people will do the right thing is not an option. While voluntary programs are attractive politically, achieving a 40% reduction in Lake Erie phosphorous loadings, if that is indeed the goal, is going to require more than reliance on goodwill. Real, sustainable, solutions are going to require a recognition that prices need to capture the full social costs of nitrogen and phosphorous use. Anything short of that will lead right back here in the future, hoping the problem solves itself.
A UN-backed conference on climate change ended with a call to end capitalism. The conference, organised by the Venezuelan government, saw 130 green activist groups meet to discuss their demands.
Green website Respond to Climate Change says that at the end of the conference, the groups issued what is being called the 'Margarita Declaration', which says: "The structural causes of climate change are linked to the current capitalist hegemonic system. To combat climate change it is necessary to change the system."
This declaration will be handed to environment ministers when they meet in the UN’s talks in Lima later this year.
Participants at the meeting included the World Wildlife Fund (WWF), Climate Action Network International, Third World Network and Christian Aid.
The declaration also condemned the idea of having a so-called "Green Economy", saying this was nowhere near radical enough, and only the end of the capitalist system would solve the problem of climate change.
Look, I get the point. Markets set prices. Prices ration goods. Because environmental goods and services are severely underpriced by markets (in many cases that price is zero), environmental goods and services are overconsumed, underproduced, overexploited, crapped on, however you want to say it. Environmentalists are rightly concerned.
Because environmental goods and services are mispriced in a market based system, market based systems must be to blame for environmental degradation and (here's where the logic breaks down) therefore, we must abandon market based systems for allocating goods and services.
But to paraphrase Winston Churchill, capitalism is the worst system for allocating environmental goods and services, except for the rest. I'm always stunned by the misunderstanding and misrepresentation of market systems by environmentalists. Markets ration scarce goods. They do so through prices. The problem with environmental degradation is not that markets lead to overexploitation of environmental goods and services, but rather market conditions fail to allow markets to establish the proper price for environmental goods and services. If the price is right, people will (usually) make rational decisions.
So, the solution to environmental issues is not to abandon markets and dictate to people the choices they should make, but rather the solution is to establish the correct set of prices that capture the full scarcity value of all goods and services, including environmental goods and services. In some cases this might happen through the establishment of markets for environmental goods and services (for example, cap and trade) or it might happen through direct pricing of environmental goods and services (for example, emissions taxes), or it might happen through restrictions on use (for example, endangered species laws).
Abandoning markets will not solve environmental problems, because the environment will still be viewed as free. Prices, or some other representation of value, are still needed, and there is simply no better way to establish prices than through markets.
Poorly functioning markets might lead to environmental problems, but well-functioning markets are the best solution.
"This blog aims to look at more of the microeconomic ideas that can be used toward environmental ends. Bringing to bear a large quantity of external sources and articles, this blog presents a clear vision of what economic environmentalism can be."
Don't believe what they're saying
And allow me a quick moment to gush: ... The env-econ.net blog was more or less a lifeline in that period of my life, as it was one of the few ways I stayed plugged into the env. econ scene. -- Anonymous
... the Environmental Economics blog ... is now the default homepage on my browser (but then again, I guess I am a wonk -- a word I learned on the E.E. blog). That is a very nice service to the profession. -- Anonymous
"... I try and read the blog everyday and have pointed it out to other faculty who have their students read it for class. It is truly one of the best things in the blogosphere." -- Anonymous