economics toolbox

The carbon bubble

John Powell — Wed, 24 Apr 2013 15:29:02 +0000

An article by Damian Carrington pointed me to a report from Lord Stern and Carbon Tracker, a non-profit organisation that is “working to align the capital markets with the climate change policy agenda”. This report has brought attention to a particular set of dimensions to the financial and economic risks of the world’s continuing consumption and dependence upon fossil fuels. The key concern is the likelihood of missing internationally agreed targets for emissions if even only existing reserves are consumed, let alone any further extension of, for instance, near-oil fuels like tar sands and shale oil. If these reserves are unburnable – which, from a climate change point of view, they are, then there is a substantial over-valuation of corporate assets (with attendant risk of the bubble bursting).

The Guardian has produced a neat interactive map showing the countries with the greatest exposure to the carbon bubble.

IEA World Energy Outlook 2012

John Powell — Thu, 15 Nov 2012 11:43:03 +0000

The International Energy Authority this week published their annual World Energy Outlook, which makes forecasts to 2035. The full report itself is €120 for the pdf but the IEA make the Executive Summary and some of the charts available (as part of the press briefing). There has been a lot of attention devoted to the predicted energy independence of the US, based on increasing extraction of ‘non-conventional’ oil and gas (which largely means fracking and shale). However, I found the chart above to be of more interest – the IEA are forecasting that the bulk of power generation in the future will come from renewables (although with coal also forming a large part of China’s generating capability). At the same time, they highlight too that the current energy is “unsustainable”, with fossil fuels having increasing levels of subsidy. The contrast to support for renewables generation, for example by the coalition government in the UK, is marked. The difference in the growth of nuclear power between Europe and Japan and the rest is another interesting aspect.

The ‘Efficient World Scenario’ the IEA posits reflects the level of CO2 emissions that keeps global climate warming at the 2° C mark. The danger is that it reflects a techno-optimist perspective – that advances in technology will deliver sufficient increases in energy efficiency to allow growing global demand to be satisfied without further risk to climate change. They do at least recognise that there are substantial barriers to achieving this and a recognition of the demand-side factors driving energy and climat change is welcome.

Climate Vulnerability Monitor (2nd Ed)

John Powell — Thu, 27 Sep 2012 09:31:29 +0000

DARA (2012), Climate Vulnerability Monitor

DARA and the Climate Vulnerable Forum have published an updated edition of their Climate Vulnerability Monitor. It provides an assessment of the “human and economic costs of the climate crisis.” The headline numbers are pretty staggering:

“Climate change is already contributing to the deaths of nearly 400,000 people a year and costing the world more than $1.2 trillion, wiping 1.6% annually from global GDP” (Harvey, 2012)

The report is extensive (311 pages) and draws on a wide range of scientific research. As with the 2006 Stern Review, failure to act to mitigate climate change (and carbon dependence) has an economic and a societal cost. However, we are running out of time to have a chance at addressing this. The Monitor cites the IEA’s view that “just five years remain for the world’s major economies to enact structural economic transformations in order to break out of a dead-end business-as-usual trap” (DARA, 2012:15). However, given the lack of international agreement at the last few climate summits, it’s not apparent to me how this will emerge.

I’ve only skimmed the Exec Summary so far (it’s a huge report), but the case made looks compelling.

Devolving the state’s functions to the market

John Powell — Thu, 21 Jun 2012 12:33:32 +0000

A lengthy article in the Guardian today by Matthew Taylor – How G4S is ‘securing your world’ – raises concerns for me about the motive and impact of private sector activity upon public sector services. Obviously, this is a well-worn concern, give the creeping privatisation of a variety of parts of the public sector (from contracting out of cleaning to the establishment of private universities). Nonetheless, I am worried about the ethos of such firms in the context of the (once) public sector.

The moral limits of markets

John Powell — Mon, 28 May 2012 10:12:18 +0000

I got Michael Sandel’s new book, ‘What Money Can’t Buy’, today in the post. Having heard his public lectures on the radio over the last couple of months and some interviews with him, I think this is likely to be added to CORP2135′s ethics coverage for next year. The module will be changing a little next year anyway, in terms of assessment and scope, and there will be more time spent on ethics. One of the reasons for this is that it seems to have been a topic that students have engaged with – the two ethics questions on the exam this year were by far the most popular choices.

Naomi Klein’s Capitalism vs the Climate

John Powell — Fri, 09 Dec 2011 11:15:03 +0000

I only came across Naomi Klein’s article in The Nation yesterday, although it was published on November 9th. It offers a detailed examination of the (US) climate change denier perspective and identifies some of the substantial changes required in order to address climate change. The ideological battle that this entails does tend to suggest it will be difficult to get the magnitude of change necessary to have some chance of slowing climate change. Nonetheless, there is a challenge to economic orthodoxy that recognises the inherent conflict between industrialised growth and environment:

There is a growing body of economic research on the conflict between economic growth and sound climate policy, led by ecological economist Herman Daly at the University of Maryland, as well as Peter Victor at York University, Tim Jackson of the University of Surrey and environmental law and policy expert Gus Speth. All raise serious questions about the feasibility of industrialized countries meeting the deep emissions cuts demanded by science (at least 80 percent below 1990 levels by 2050) while continuing to grow their economies at even today’s sluggish rates.

(Klein, 2011)

Tracing the influence of Prospect Theory

John Powell — Sun, 27 Nov 2011 19:42:25 +0000

As part of a review of Kahneman’s new book, Thinking, Fast and Slow, by Evan Goldstein in the Chronicle of Higher Education, there is a fantastic infographic tracing citations for Kahneman and Tversky’s 1979 paper (see below). What is interesting is just how broad the range of disciplines citing prospect theory is. Obviously, psychology and economics figure quite significantly, but the volume of business and management citations suggest a wider practical impact perhaps.

Digital currency

John Powell — Thu, 24 Nov 2011 09:59:44 +0000

Came across an interesting article by Benjamin Wallace on bitcoin, the attempt to create a digital currency, in Wired. The history of bitcoin reads as if it’s from a William Gibson or Neal Stephenson book. The practical and market aspects of the way bitcoin has developed (and perhaps failed) are quite interesting, and show some of the inherent difficulty in trying to replace our conception of ‘money’ with something a little different.

Peak oil

John Powell — Wed, 02 Nov 2011 12:37:53 +0000

Univ. of California physics prof Tom Murphy’s blog – Do the Math – has a lengthy and stimulating discussion about peak oil data (and the analysis of such). I’m grateful to Joss Winn for sharing the link via Twitter.

One of the aspects I found interesting about the analysis was the plot of oil production as a function of price:

On the left-hand side, we see a familiar correlation of price and production: if spare capacity exists, higher prices stimulate increased production. But something dramatic happens at about 84 Mbpd. Increasing the price by a factor of three is insufficient to budge production by more than a few percent. There appears to remain a slight positive slope (economics still works in the normal sense), but the thing is incredibly inelastic.

Essentially, given the finite nature of the resource and issues to do with extraction, the market reaches a point where higher prices are unable to drive greater production volume. Given our dependence on oil (and slow pace of change away from oil) , this might be seen as problematic, to say the least.

Murphy also links to a Mother Jones article about work by James Hamilton – Oil Prices, Exhaustible Resources, and Economic Growth [pdf]. I’ve not had a chance to read it yet, but it looks interesting.

Technological progress

John Powell — Thu, 08 Sep 2011 15:24:44 +0000

It occurs to me that were I having to restructure the site the ‘old’ way – ie manually in Dreamweaver, rather than in WordPress, it would have been a lot more painful. I think I was actually putting it off as I could only remember the pain of manually doing it (and had forgotten the ease of doing it in WordPress, even if it is in the browser).

Conclusion? WordPress is fab…

[that I've been able to post this from my iDevice whilst sitting on the sofa is simply icing on the WordPress cake]