Environmental Economics

Craig Landry's Ziemer Lecture introduction slides

Forecasting global oil demand

Exxon doesn't seem to be incorporating all available information:

At the company’s planned annual meeting on Wednesday in Dallas, shareholders will vote on a resolution to prod Exxon Mobil to disclose the risks of climate change to its business.

Such resolutions have been floated before, and they typically do not pass. But there is a growing chorus of investors, many of them large institutional shareholders, who say they are worried that Exxon Mobil, the largest publicly traded energy company in the world, is not adequately preparing for tighter times if countries start acting on the pledges they made last December as part of the Paris climate change accord.

Exxon Mobil, for example, projects that global demand for oil will keep growing — by just over 13 percent from today, to 109 million barrels of oil a day by 2040.

But the International Energy Agency’s projections include one situation where demand could drop by 22 percent, to 74 million barrels a day by 2040, if measures are put in place to keep global warming at levels that, while still dangerous, could avoid the most devastating consequences.

The shareholder resolution calls for Exxon Mobil to publish an annual assessment of impacts of various climate change policies, including ones that would lead to the steep drops foreseen in the most severe energy agency’s forecast. Another resolution calls for the company to give shareholders a bigger say over governance.

Exxon Mobil previously tried to block the climate change resolution, but the Securities and Exchange Commission ruled in March that shareholders must be allowed to vote.

via www.nytimes.com

Here it is from 2014 (PDF):

Our Outlook for Energy long-term supply and demand forecast underpins our strategy and investment plans. With population growth, rising economic prosperity, and increasing trade and technology, we project global energy demand to grow 35 percent between 2010 and 2040.

At the least there should be an asymmetric confidence interval around their demand forecast. It seems odd that there isn't one given their attention to the potential impact of climate policy in this passage from a report posted on their website with no title page: 

We also address the potential for future climate-related controls, including the potential for restriction on emissions, through the use of a proxy cost of carbon. This proxy cost of carbon is embedded in our current Outlook for Energy, and has been a feature of the report for several years. The proxy cost seeks to reflect all types of actions and policies that governments may take over the Outlook period relating to the exploration, development, production, transportation or use of carbon-based fuels. Our proxy cost, which in some areas may approach $80/ton over the Outlook period, is not a suggestion that governments should apply specific taxes. It is also not the same as a “social cost of carbon,” which we believe involves countless more assumptions and subjective speculation on future climate impacts. It is simply our effort to quantify what we believe government policies over the Outlook period could cost to our investment opportunities. Perhaps most importantly, we require that all our business segments include, where appropriate, GHG costs in their economics when seeking funding for capital investments. We require that investment proposals reflect the climate-related policy decisions we anticipate governments making during the Outlook period and therefore incorporate them as a factor in our specific investment decisions.

When governments are considering policy options, ExxonMobil advocates an approach that ensures a uniform and predictable cost of carbon; allows market prices to drive solutions; maximizes transparency to stakeholders; reduces administrative complexity; promotes global participation; and is easily adjusted to future developments in climate science and policy impacts. We continue to believe a revenue-neutral carbon tax is better able to accommodate these key criteria than alternatives such as cap-and-trade.

Our views are based on our many years of successful energy experience worldwide and are similar to long-term energy demand forecasts of the International Energy Agency. As discussed previously, we see population, GDP and energy needs increasing for the world over the Outlook period, and that all economically viable energy sources will be required to meet these growing needs. We believe that governments will carefully balance the risk of climate change against other pressing social needs over the Outlook period, including the need for accessible, reliable and affordable energy, and that an artificial capping of carbon-based fuels to levels in the “low carbon scenario” is highly unlikely.

Funny, their "proxy cost" of carbon is not a social cost of carbon. 

A bit of Land Grant University history

From the back story of Tuesday's NY Times Morning Brief:

Strains of Edward Elgar’s “Pomp and Circumstance” March No. 1 are echoing across the land this commencement season.

For hundreds of thousands of undergraduates, higher education was made possible, in part, by the U.S. government’s two Morrill Acts. The legislation helped create our great public universities, with land grants.

During the Civil War, President Lincoln quietly pushed Congress to pass the first Morrill Act — named for its sponsor, Justin Morrill, a Vermont congressman.
It gave federal land to the states to create universities. States received 30,000 acres for each of their congressional seats. About 100 million acres were eventually handed over, and dozens of universities were founded.

The states used the sale of some of the land to start new schools, like Cornell, Auburn and Clemson and many flagship state universities, or gave the money to existing ones to teach “agriculture and the mechanic arts.” Many of those universities became known as “A&M” schools, like Texas A&M. The “mechanic arts” refer to engineering, like M.I.T., which later became private.

The Second Morrill Act, in 1890, led to 19 new universities, mostly in the country’s Southeast, that would be accessible to the four million blacks freed by the Emancipation Proclamation.

Today, it’s hard to imagine the U.S. without these great universities.

I took classes in the College of Agriculture at the University of Kentucky in the late 1980s. I would have been an ag econ student but was denied funding (sniff). Everything worked out OK but, as a result of that rejection, I've always been a wannabe aggie, applying for and not getting various jobs over the years. 

That is one reason why it was so special to be invited to give the the 30th annual Rod Ziemer lecture Thursday, April 7 in the Department of Agricultural and Applied Economics at the University of Georgia. There is no webpage for the 2016 lecture but here is a description from 2005:

The annual lecture series began in 1986 in memory of former UGA graduate student Rod Ziemer, who died in a car accident in Texas in 1984.

Ziemer wrote more articles than any other agricultural economics graduate student. Selected as the College of Agricultural and Environmental Sciences outstanding graduate student, he also received the American Agricultural Economics Association Outstanding Dissertation Award.

The lecture is designed to kindle a spirit of excellence in future generations of agricultural economics graduate students.

Thanks to the Graduate Student Association for inviting and hosting (and making me feel like an honorary aggie)! Here is my presentation:  Download Whitehead - Zeimer Lecture. One of the first slides includes the title pages of a couple of Ziemer's articles that I remember reading in grad school.

The Trump version of stated versus revealed preferences

Trump's stated position on climate change on Dec. 30, 2015, in Hilton Head, S.C.,

"Obama's talking about all of this with the global warming and … a lot of it's a hoax. It's a hoax. I mean, it's a money-making industry, OK? It's a hoax, a lot of it."

Trump's revealed position on climate change:

Donald Trump wants to build another huge wall, this time to keep out the rising seas threatening to swamp his luxury golf resort in Ireland.

The Republican presidential candidate has called climate change a ''con job'' and a ''hoax.'' But in an application filed this month in County Clare, Ireland, the Trump International Golf Links and Hotel cites the threat of global warming in seeking a permit to build a nearly two-mile-long stone wall between it and the Atlantic Ocean. The beach in front of the 18th green is disappearing at a rate of about a yard each year.

Trump's application, first reported Monday by Politico, cites local regulations pertaining to ''rising sea levels and increased storm frequency and wave energy associated with global warming.'' An attached environmental impact statement says that almost all the dunes in western Ireland are retreating ''due to sea level rise and increased Atlantic storminess.''

"Dutch university ordered to pay economist after she was accused of plagiarism"

Retraction Watch:

A court in the Netherlands has fined Vrije Universiteit Amsterdam (VU) 7,500 euros to compensate for “immaterial damage” to an economist accused of plagiarism.

Karima Kourtit, a researcher at VU, has been at the receiving end of anonymous complaints to her institution accusing her of plagiarism and her professor, high-profile economist Peter Nijkamp, of duplication (i.e. self-plagiarism). Kourtit is now seeking to prosecute the unnamed source of the complaint for defamation; the VU told us it will no longer accept fully anonymous complaints.

The case began when VU cancelled Kourtit’s thesis defense for plagiarism, and a report published on the VSNU, the Association of Universities, accused Nijkamp of self-plagiarism. Two of Nijkamp’s papers have been retracted as a result of the investigation; Kourtit is an author on one of the retracted papers.

A VU spokesperson told us:

The court concluded that Vrije Universiteit Amsterdam has to pay Dr Kourtit E7500 [around $8,400 USD]…to compensate immaterial damage, because of the publications in the time of her PhD-defense that was cancelled.

Nijkamp was not a part of this procedure.

According to the VU spokesperson, the court found that the VU handled the scientific integrity procedures of the case “correctly,” including the anonymous complaints. 

Kourtit’s lawyer told us the court has also ordered the VU to pay material damages, to be estimated in a separate procedure; he said the amount will be a “multiple” of the 7,500 euro figure.

Not everyone at VU has the same views regarding the case. As we reported previously, a commission led by Jaap Zwemmer, then professor emeritus at the University of Amsterdam, found Nijkamp to be guilty of “questionable research practices” after deciding that 61 out of his 260 writings had problems associated with “frequent use.” ...

via retractionwatch.com

I'm posting this at the risk of being sued. Yikes.

"The Decline of Coal"

RFF on the issues:

According to new data from the US Energy Information Administration, most of the two dozen states that have sued to block the Clean Power Plan have decreased coal usage regardless. Reflective of the changing US energy landscape, the new data indicates many of these same states are also leaders in the wind industry. In the Washington Post, RFF Visiting Fellow Nathan Richardson explains the apparent inconsistency between the data and states' decision to sue: “Utilities and the states might not mind so much if market forces cause them to change, but they don’t want the EPA to tell them to do it … They are fighting to keep the option to grow their coal use in the future.”

via www.rff.org

From the WaPo article:

Scott Segal, a partner at Bracewell LLP, a firm that represents some energy industry clients who also are challenging the Clean Power Plan, added that anticipation of regulation itself is a factor driving down coal usage.

“This data is not particularly surprising,” Segal said, reacting to the EIA figures. “The decline in coal use reflects both the anticipation of regulatory standards and the sustained low commodity prices of natural gas. However, the Clean Power Plan is still a significant game changer.

“The present energy market is just that: a market,” he continued. “It reacts flexibly and pragmatically to market forces. By contrast, the Clean Power Plan is designed to make market forces with respect to energy choice permanent and immutable.”

Thus, he said it isn’t fair to suggest that states opposing the Clean Power Plan have less reason to oppose merely because they now burn less coal. There’s also a matter of principle involved. These states, in aggregate, are also being asked to do much more to change their energy mixes to reduce carbon dioxide emissions than are states who support the plan, noted Jeff Holmstead, also an attorney at Bracewell LLP and a former assistant administrator of the EPA’s Office of Air and Radiation during the George W. Bush administration.

It could be argued that a carbon tax (or cap-and-trade) would be one way to allow states to keep the option to grow their coal use in the future. In other words, you can use all of the coal that you want but there is a tax that you must pay to use it. 

How to take a forest bath: Step 1, find a forest. Step 2, walk.

Apparently what we used to call a nature walk (or a stroll through the park, or a walk in the woods) is now a form of meditation:

To give shinrin-yoku a try, choose a spot based on physical ability and convenience. Do not choose a route that is too strenuous: It is recommended that in four hours, you should walk no more than three miles. This is not an endurance hike. Rest when necessary and find a spot where it is pleasant to sit and read for a while or simply look out into the trees. It is OK to bring water or green tea. It is also recommended that, if possible, a forest bath is followed up with a hot spring bath.

...and the hot spring bath followed with a Mr. Bubbles bubble bath.   

If only John Muir, or Emma Gatewood, or Thoreau, or Bill Bryson were alive to see this. 

Oh, wait, Bryson is alive.

The new issue of JAERE is out

From the inbox:

Dear John, The latest issue of the Journal of the Association of Environmental and Resource Economists (JAERE) is now available on the University of Chicago Press Journals website.  As a reminder, AERE 2016 membership provides exclusive online access to the full run of JAERE in full text, PDF, and e-Book editions – at no additional charge. To access your members-only journal subscription, log in to the AERE website using the email address and password associated with your membership. If you haven't renewed yet for this year, you can do that conveniently online as well. If your institution subscribes to JAERE and you have been in the habit of accessing articles through that institutional subscription, please note that their catalog will be updated to direct to the new University of Chicago Press Journals website; however you may wish to add your own bookmark pointing to: journals.uchicago.edu/toc/jaere/current. Sincerely, The University of Chicago Press Journals Division

Table of Contents: Volume 3, Issue 2 | June 2016 Journal of the Association of Environmental and Resource Economists   Articles Intergenerational Games with Dynamic Externalities and Climate Change Experiments Katerina Sherstyuk, Nori Tarui, Majah-Leah V. Ravago, Tatsuyoshi Saijo   Credit Constraints, Technology Upgrading, and the Environment Dana C. Andersen   Disgust, Shame, and Soapy Water: Tests of Novel Interventions to Promote Safe Water and Hygiene Raymond P. Guiteras, David I. Levine, Stephen P. Luby, Thomas H. Polley, Kaniz Khatun-e-Jannat, Leanne Unicomb   Incidence, Environmental, and Welfare Effects of Distortionary Subsidies Garth Heutel, David L. Kelly   Environmental Migration and Labor Markets in Nepal Jean-François Maystadt, Valerie Mueller, Ashwini Sebastian   What Lies Beneath? Aquifer Heterogeneity and the Economics of Groundwater Management Eric C. Edwards   Intergenerational Inequality Aversion, Growth, and the Role of Damages: Occam’s Rule for the Global Carbon Tax Armon Rezai, Frederick Van der Ploeg

I'm on a first name basis with AERE. 

EnvEcon is the cream of the chaff...or something like that?

The Intelligent Economist (oxymoron?) lists the 100 best economics blogs for 2016:

If you’re looking for practical, insightful and educational economics blogs, you’ve come to the right place. Here are the 100 best economics blogs online, listed in no particular order. Today, as you know, there’s no shortage of high-quality economics blogs on the web. But we decided to separate the wheat from the chaff and give you the absolute cream of the crop. Whether you’re new to economics, or have an interest in a range of economics topics like econometrics and macroeconomics, or simply want to keep up with global economics, these economics blogs give you the rundown, insights and explanations you need to get a good understanding of economics.

Emphasis added to make sure you notice that theses are IN NO PARTICULAR ORDER--so we consider ourselves #1.

Here are the environmental blogs that found their way onto the list:

83. Environmental Economics:  Environmental Economics is a blog intended for a wide audience and approaches its arguments with an easy to understand writing style. The two authors, Tim Haab and John Whitehead are both Economics Professors.

87. An Economic View of the Environment: An Economic View of The Environment is a blog by Robert Stavins, who is a professor at Harvard University and is the Director of the Harvard Environmental Economics Program. His posts paint a comprehensive view of global environmental issues from an economic standpoint.

95. Environmental and Urban Economics: This site by Matthew Kahn, a leading American educator in the field of environmental economics is self described as a blog that addresses environmental and urban issues from an environmental perspective. This is a great read for economists interested in the environment.

100. Aguanomics: David Zetland is an Assistant Professor of Economics at Leiden University College in Den Haag, the Netherland and the creator of Aguanomics. This is a blog dedicated to a discussion of the economic and political factors affecting the way we manage water.

Of course these are IN NO PARTICULAR ORDER (but I include the number rankings, just in case).

There are other blogs on the list that occasionally touch on environmental issues, but these are the four that seem to be dedicated to environmental and resource issues.

HT: Matt Kahn via Twitter

A CGE model that finally answers the big question ... green jobs or job killer?

Marc Hafstead and Roberton C. Williams III:

As environmental economists, we are often asked about how environmental regulations or policies will affect jobs and the unemployment rate. This should be no surprise as employment effects often play a central role in the political debate over environmental policy, with “green job” arguments on the left and “job killer” claims on the right. But existing economic models are not well-suited to answering the question of how regulation affects jobs.

Two types of studies have attempted to measure employment effects. Empirical analyses of existing regulations have measured the effect on jobs in regulated industries but not the effect on jobs in unregulated industries—and thus can’t address the overall effect. ... General equilibrium models do account for both the direct and indirect effects of environmental regulation, but almost always assume full employment (in other words, that everyone who wants a job has one) and ignore labor market dynamics.

Over the past two years, we have developed a new general equilibrium model specifically designed to study the effects of environmental regulation on employment and unemployment.  This model adds a job search requirement (unemployed workers must search for open jobs) to a general equilibrium model of environmental regulation. Like other general equilibrium models, it can measure both direct and indirect effects, and adding a job search avoids the full-employment assumption and lets the model look at labor market dynamics.

In a new RFF discussion paper, we introduce the model and apply it to look at policies aimed at reducing carbon dioxide (CO2 ) emissions in the United States. ... The model estimates that a tax of $20 per ton on the CO2 emissions of the dirty sector, with revenues rebated to households in lump-sum fashion, would increase the unemployment rate by 0.26 percentage points. In comparison, the unemployment rate increased 4.5 percentage points during 2007–2009. This effect is much smaller if the revenues are used to finance reductions in the payroll tax. That carbon tax/payroll tax swap raises the unemployment rate by only 0.02 percentage points. These results suggest that the net effect of carbon pricing on unemployment is likely to be very small.

However, looking only at the overall change in unemployment does not tell the whole story. Our model indicates that a carbon tax would cause a notable shift in jobs between the two sectors. We find substantial job losses in the polluting sector—not via layoffs, but rather through natural attrition and a big drop in hiring in that sector. These are offset by a similarly sized gain in jobs in the clean sector (driven both by demand, as consumers shift away from pollution-intensive consumer goods, and by reduced competition for workers from the dirty sector). ...

via www.rff.org

Finally, confirmation of my assertion (e.g., here and here and here and here ... there are more).