Environment

Natural disasters, firm activity, and damage to banks

Kaoru Hosono, Daisuke Miyakawa, 13 August 2014

Natural disasters affect firm activities both directly and indirectly. One prominent indirect effect is on firms’ transaction partners, in particular – their banks. This column shows how damage to banks affects firm activities, such as capital investment and exports, using as a natural experiment Japan’s 1995 Kobe earthquake. Bank damage has a significant and negative impact on both firm investment and on exports but this effect does not last very long.

Dealing with the threat of climate catastrophe

Rick van der Ploeg, Aart de Zeeuw, 31 July 2014

Many ecological systems feature ‘tipping points’ at which small changes can have sudden, dramatic, and irreversible effects, and scientists worry that greenhouse gas emissions could trigger climate catastrophes. This column argues that this renders the marginal cost-benefit analysis usually employed in integrated assessment models inadequate. When potential tipping points are taken into account, the social cost of carbon more than triples – largely because carbon emissions increase the risk of catastrophe.

Rethinking African solar power for Europe

Emanuele Massetti, Elena Ricci, 23 July 2014

Concentrated solar power generation in Northern African and Middle Eastern deserts could potentially supply up to 20% of European power demand. This column evaluates the technological, economic, and political feasibility of this idea. Although concentrated solar power is a proven technology that can work at scale, it is currently four or five times more expensive than fossil fuels. Concentrated solar power could play an important role in Europe’s energy mix after 2050, but only if geo-political challenges can be overcome.

Discounting the very distant future

Stefano Giglio, Matteo Maggiori, Johannes Stroebel, 21 June 2014

Long-run discount rates have big implications for fiscal and climate-change policies. This column estimates a discount rate for very long-run housing cash flows of 2.6%. This suggests that people are more willing than previously thought to invest today for the benefit of future generations, particularly if the benefits occur with certainty.

Inferred fossil-fuel subsidies: A new database

Radek Stefanski, 30 May 2014

No comprehensive database of directly measured fossil-fuel subsidies exists at the international or the sub-national level, yet subsidies may be crucial drivers of global carbon emissions. This column describes a novel method for inferring carbon subsidies by examining country-specific patterns in carbon emission-to-output ratios, known as emission intensities. Calculations for 155 nations from 1980-2005 reveal that fossil-fuel price distortions are enormous, increasing, and often hidden. These subsidies contributed importantly to increasing emissions and lower growth.

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