Dirty little secrets: Inferring fossil-fuel subsidies from patterns in emission intensities
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.
An astonishing feature of international energy and climate policy is that fossil fuels – often seen as the primary contributor to climate change – receive enormous government support (IMF 2013, IEA 2012). Surprisingly, no comprehensive database of directly measured, comparable fossil-fuel subsidies exists at the international level. This is both because of political pressure from the direct beneficiaries of subsidies and because of the immense complexity of the task given the profusion and diversity of subsidy programmes across countries (Koplow 2009, OECD 2012).
energy, emissions, pollution, subsidies, fossil fuels, energy subsidy, carbon
Climate policy targets revisited
Richard S J Tol 25 April 2014
The IPCC’s Fifth Assessment Report estimates lower costs of climate change and higher costs of abatement than the Stern Review. However, current UN negotiations focus on stabilising atmospheric concentrations of greenhouse gases at even lower levels than recommended by Stern. This column argues that, given realistic estimates of the rate at which people discount the future, the UN’s target is probably too stringent. Moreover, since real-world climate policy is far from the ideal of a uniform carbon price, the costs of emission reduction are likely to be much higher than the IPCC’s estimates.
The Stern Review of the Economics of Climate Change is the most famous economic assessment of climate policy (Stern et al. 2006). The Stern Review puts the costs of unmitigated climate change at 5–20% of GDP (now and forever), it estimates that the cost of stabilising atmospheric concentrations around 525 ppm CO2e are 1% of GDP (in 2050), and recommends that concentrations be stabilised around 500 ppm CO2e.1
climate change, emissions, externalities, greenhouse gases, pollution, carbon, cost-benefit analysis
The housing-market impacts of shale-gas development
Lucija Muehlenbachs, Beia Spiller, Christopher Timmins 09 February 2014
Compared to coal and oil, shale gas offers the prospect of greater energy independence and lower emissions of carbon dioxide and other pollutants. However, fracking is controversial due to the local externalities it creates – particularly because of the potential for groundwater contamination. This column presents evidence on the size of these externalities from a recent study of house prices. The effect attributable to groundwater contamination risk varies from 10% to 22% of the value of the house, depending on its distance from the shale gas well.
Technological improvements in the extraction of natural gas from shale rock have transformed the industry.
house prices, housing, externalities, pollution, property prices, shale gas, fracking
Market mechanisms for regulation: Cap-and-trade and Obamacare
Jeffrey Frankel 27 February 2014
Market-based mechanisms such as cap-and-trade can tackle externality problems more efficiently than command-and-control regulations. However, politicians in the US and Europe have retreated from cap-and-trade in recent years. This column draws a parallel between Republicans’ abandonment of market-based environmental regulation and their recent disavowal of mandatory health insurance. The author argues that in practice, the alternative to market-based regulation is not an absence of regulation, but rather the return of inefficient mandates and subsidies.
Markets can fail. But market mechanisms are often the best way for governments to address such failures. This has been demonstrated in areas from air pollution, to traffic congestion, to spectrum allocation, to cigarette consumption.
Environment Politics and economics
environment, global warming, pollution, regulation, healthcare, Cap-and-trade, market-based mechanisms, Obamacare, EU ETS
Can passenger railways curb road-traffic externalities? Empirical evidence
Rafael Lalive, Simon Luechinger, Armin Schmutzler 15 March 2013
Against a backdrop of road accidents, pollution and congestion, many governments subsidise railways with the aim of reducing such externalities. But do improvements in public transport work? This column argues that recent empirical evidence confirms our expectations and, moreover, that public-transport improvements offer good value for money.
Road accidents kill 1.2m people every year (WHO). Road transportation is the main source of local air pollutants such as nitrogen oxide and carbon monoxide. It contributes to noise and global air pollution, and it leads to congestion. Against this backdrop, many governments subsidise railways with the explicit aim of reducing road-traffic externalities. However, do improvements in public transport really curb road-traffic externalities? In this column, we discuss recent empirical evidence identifying positive effects of public-transport improvements.
Environment Frontiers of economic research Productivity and Innovation
externalities, pollution, infrastructure, railways, trains
Are property values affected by concerns over groundwater contamination from shale?
Lucija Muehlenbachs, Beia Spiller, Christopher Timmins 29 September 2012
Natural gas is seen as an attractive source of energy – it is cleaner than coal and often more reliable. But there are potential risks from the drilling and hydraulic fracturing process. This column shows how shale gas extraction could reduce property prices, and argues that policymakers need to bear this in mind when thinking about the costs and benefits.
A recent increase in the extraction of natural gas and oil using unconventional methods has transformed communities and landscapes. Shale gas extraction has grown rapidly in recent years thanks to developments in hydraulic fracturing and horizontal drilling. The extraction of natural gas from shale, which had hitherto been economically unrecoverable, has resulted in greatly expanded supply and in many landowners receiving high resource rents for the hydrocarbons beneath their land.
externalities, pollution, natural gas, property prices
Identifying the worldwide pollution haven effect
Jean-Marie Grether, Nicole A. Mathys, Jaime de Melo 23 December 2010
Environmentalists have long feared that globalisation will harm the environment by allowing heavily polluting industries to migrate to countries with lax environmental standards. This column presents new evidence from several industries across many countries for all the major pollutants. It suggests that lax policy has only had a small effect on the pollution content of trade.
For the environmentally minded, globalisation reflected in rising trade shares in world GDP is worrisome. Globalisation is a direct concern because the activity of trading itself generates pollution through the transport of goods (Hummels 2009 and Grether et al. 2010a), and an indirect concern because lower environmental standards generate a comparative advantage in "dirty" industries for developing countries (Antweiler et al 2001).
Environment International trade
globalisation, environment, pollution
The rise of “consumer cities” in China
Matthew E. Kahn, Siqi Zheng 14 April 2009
What should China do about its noted pollution problems? This column shows that Chinese cities with less air pollution have higher home prices, suggesting that “green amenities” enter housing prices. Moreover, this marginal valuation of clean air is rising over time. China’s major cities may be becoming cleaner as their inhabitants demand improved environmental conditions.
China’s population is rapidly urbanising. The share of the population living in cities in China increased from 28% in 1990 to 44% in 2006. The annual real wage of an average urban worker in 2006 was four times higher than in 1990.
China, pollution, cities, green amenities, environmental Kuznets curve
Trade growth, global production, and environmental degradation
Judith M. Dean , Mary E. Lovely 14 May 2008
Chinese trade and pollution have exploded over the last decade. But new evidence shows that trade isn’t to blame for the pollution. In fact, Chinese imports and exports are becoming cleaner over time.
The sheer scale of China's recent trade growth and its environmental degradation are unprecedented.1 In current dollars, the value of China’s exports plus imports rose from $280.9 billion in 1995 to $1422.1 billion in 2005 – a growth of over 400%. Meanwhile, there are almost daily media reports of Chinese rivers and lakes poisoned by pollution and algal bloom, water tables dropping too low to meet basic needs, farmlands tainted by industrial pollution and fertilisers, and cities choking on smog.
Environment International trade
China, environment, pollution, trade growth