The Not-So-New Climate Economy Report

An alliance of the most influential global institutions, including the UN, World Bank, IMF and OECD, just issued a report of the Global Commission on the Economy and Climate, chaired by Felipe Calderón and Nicholas Stern. The report’s title is Better Growth, Better Climate: The New Climate Economy. In a nutshell, it says that not only is climate action compatible with economic growth, but the two may actually work as a positive feedback loop: more climate action leading to more growth, “smart” growth-spurring policies reducing emissions of greenhouse gases. By and large, the report does not contain any new arguments, as it is more of a synthesis of existing research. Alas, it is a synthesis of only a part of existing research, which can be already seen in the title: economic growth is a main objective along with the mitigation of climate change. You’ll vainly look for any reference to the degrowth and a-growth debates, and so the report, while valuable in some respects, reproduces many of the common errors of growth-enthusiasts. Continue reading

A Question of Balance

“It’s a question of balance.” I guess, this might be the most often-used phrase on this blog. Today, again, I would like to write about an important balancing act that is not easy to achieve. Particularly so, as we have to achieve it (almost) everyday. It is the balance between being satisfied, on the one hand, and not being satisfied, on the other. Continue reading

Resource Economics’s Most Problematic Assumption

Every theory or, to use the term famously coined by Thomas Kuhn, paradigm is based on a set of assumptions. Some assumptions are more, others less important for the overall theoretical system that is built upon them. This has to do with the ease with which they can (or cannot) be relaxed if shown not valid. It is, however, a truism that every model, theory or paradigm must be based on simplifying assumptions and that “closeness to reality” is seldom a relevant criterion for their evaluation (this latter statement must be, of course, qualified, which I will do below). Resource economics, i.e., the branch of economic theory that deals with the exploration, extraction and markets for (non-renewable) resources is no exception from this rule. One of my professors at the university used to present empirical findings regarding important assumptions of economic theory (such as the interest rate parity) by stating: “This is one of the few economic assumptions that stand up to reality.” The so-called Hotelling’s rule, one of the crucial models and assumptions of resource economics, is not one of those few. Continue reading

Stanley Jevons’s Prophecy

In his famous treatise The Coal Question: An Inquiry Concerning the Progress of the Nation, and the Probably Exhaustion of Our Coal-Mines, published almost 150 years ago, the British economist William Stanley Jevons described a phenomenon whose importance today might be even higher than back in 1865–the so-called rebound effect, also known under the names of second-order effect, Khazzoom-Brookes effect, backfire or Jevons’s paradox. Jevons argued that the increased efficiency of steam engines shall lead to increased use of them and thus, counter-intuitively, to an increase in coal consumption. His insights have surprising relevance for today’s debates on economic growth and climate change. Continue reading

Talking About Green Jobs Might Impede Action on Climate Change

Advocates of true action on climate change do not have an easy job to do. Scientists keep producing evidence of dangerous man-made climate change, the IPCC keeps producing reports that summarize that evidence, activists keep doing their activism… Meanwhile, politicians, and decision-makers more generally, keep talking and the society at large sticks to business-as-usual. No wonder that the “alarmists”, as we are sometimes called, are steadily looking for new powerful arguments. In hope either that a specific single argument will suddenly make people wake up and act on climate change, or that the accumulated mass of arguments will do. One such argument is about so-called “green jobs”. Clean technology investments are presented as a great opportunity to create jobs, as a growth booster. However, in this specific case, the well-intentioned pro-climate-action argument might actually be a shot in the cause’s foot. Continue reading

Emissions Trading and Feed-In Tariffs: Do We Need Both?

When I started this blog some 3.5 years ago, the focus was on climate issues, particularly climate economics. More recently, however, I have neglected this topic a little. Fortunately, working at a research institute gives one the opportunity to learn a lot about things other scientists do–e.g., regarding the quite popular question whether the EU needs both emissions reduction and renewable energy deployment targets such as the 20-20-20 target. In other words: do we need an energy mix consisting, e.g., of emissions trading and feed-in tariff schemes? Or is emissions trading enough to reach policy goals? And, by the way, what are these goals? Continue reading

Want to Save the World? Start in China

Within a few days, Yale e360 published two extremely interesting analyses of China’s recent environmental and social problems: China’s Great Dam Boom by Charlton Lewis and China at Crossroads by Ed Grumbine. Both fascinating in their own right, these articles show that if you want to save the world from a looming environmental catastrophe, you have to start in China. Continue reading