So what are the recent news?

  • Countries are currently putting in pledges for the negociations at COP21 in Paris. At the moment, these INCDs (intended nationally determined contributions) from 150 countries would possibly (given the uncertainty) lead the world onto a 3°C warming path. In general, many scientistics suggest that the objective should be to reach at maximum a 2°C warming, simply because we have very little information as to what is going to happen if the world warms by more than 2°C. So if those INCDs are the maximum that all countries are willing to pledge, then what else should be done at COP21? Jeremy Woods suggests the following:

    Firstly, there needs to be consensus among the world’s largest emitters, both industrial and developing countries, that they can deliver the lifestyles their populations will demand and cut emissions drastically. That pathway will require that global rules around competition are reset and that common ground-rules for competition and innovation are established across the board. Secondly, the INDCs are a very small step along this road and the trajectory from 2030 to 2050 must be clearly signposted in order to allow the necessary private sector investment to be made now and over the coming decades to deliver the innovations needed. Public sector financing alone is totally inadequate for the job ahead.

  • Dan Farber has some neat suggestions how managers may more easily take care of the externalities that they create: simply expose themselves to it:

    For instance, we could require managers of nuclear plants, utility officials, and officials of reactor manufacturers to live within a mile of the plant, along with their families.  That would enhance the incentive to think of safety.   Similarly, we might require oil company executives and their families to live within a mile of a refinery, so they would experience the same risks and the same exposure to air pollution as the surrounding community.

  • It is often claimed that there is not enough space for alternative sources of electricity. So what is the situation in Germany? A recent study finds that there is plenty of space.

    Germany could install 125 gigawatts of wind turbines on only 1.7 percent of the country – on land, not including offshore wind farms. Likewise, 143 gigawatts of PV could be installed on 0.9 percent of the country.To put these numbers into perspective, a recent study by Fraunhofer IWES investigating a 100 percent renewable supply of electricity found the need for only 87 gigawatts of onshore wind along with 40 gigawatts offshore. For PV, IWES estimated that 134 gigawatts would be needed, slightly less than what the BBR found to be feasible.

    Is 0.9 percent of the country for PV a lot? One thing is often overlooked: put solar on a rooftop, and you haven’t taken up any additional space at all. The study found that “even if a third of all suitable roofs are not used for solar because the building owners simply don’t want to, the technically suitable roof potential is enough to install 65 GW by 2032… without any need for new ground-mounted arrays at all.” In other words, Germany could get around 10 percent of its electricity from PV using only two thirds of suitable existing rooftops.

  • On Friday I was at the excellent 62nd Economic Policy Panel Meeting in the Central Bank of Luxembourg and was, together with Timo Goeschl, the discussant of a recent article of John Hassler, Per Krussell and Jonas Nycander. This is a policy-relevant article that is going to be published in the journal Economic Policy, and discusses their 2014 Econometrica paper with Mikhail Golosov and Aleh Tsyvinski, Optimal Taxes on Fossil Fuels in General Equilibrium, as well as provides further points on the green paradox, integrated assessment modelling, etc. Though I can’t give you many details yet (you can get the published version in June), what is interesting to see is that there has been a recent trend away from these large black-box integrated assessment models to smaller, more intuitive approaches that are analytically tractable. My main point is the following: In order to make these reduced-form integrated assessment models analytically tractable one has to resort to some stronger assumptions. Weakening those assumptions requires one to additionally address those other factors that make integrated assessment models so complicated, and one is back at the black box approach. Then again, given that we know very little about the damage functions, etc., one can obviously not claim that the reduced-form models are worse or better than the standard integrated assessment models that also rely on particular assumptions on e.g. damage functions.
    Pindyck is much more negative about integrated assessment models in general. Matthew Kahn discusses a bit about Pindyck’s comments. In case you are interested, you can read his full critiques HERE or in his new working paper HERE.
  • The European Society of Ecolocial Economics presents a new Handbook of Ecological Economics.