environmental policy

So folks, this is it. Anyone who ever thought it was impossible, there isn’t enough space, it is too expensive, or whatever other unreasonable argument was ever forwarded: The #energiewende is there, it is not only happening in Germany but worldwide. Take a look at Figure 1 below. Nuclear energy production is stagnating, and that for more or less the past 30 years, while alternative sources of energy, wind and solar, are now nearly producing the same amount of electricity as nuclear is. energiewende

This should be a slap in the face for all doubters, for all naysayers and pessimists alike. We do not need nuclear energy, we have safe alternative sources of energy, they are able to produce the same amount of electricity as nuclear is, and if they keep growing just for a little while longer as they have been growing during the past couple of years, then we won’t need nuclear energy in our future energy mix at all. And we might even be able to significantly reduce non-renewable sources of electricity production.

Has anyone seen a significant drag on economic growth from this #energiewende? Has anyone noticed a significant increase in unemployment? Where are the promised recessions, where are the masses of job losses, productivity reductions and losses in international competitiveness that we were promised if we were ever moving to greener sources of electricity production? Anyone? Honestly, the only recessions, the only losses in employment, the only high costs that we know about come from the financial world, from rich people juggling around billions of dollars a day to take advantage of minimal spreads in the name of economic growth; from the banks that try to push up their return on assets and sell us mortgage-backed securities based on worthless mortgages and that do more shadow banking than actual banking; from companies that try to make us believe that we need to buy more and more in order to become happier, better people. Is that really how it should be? Are we really barking up the right tree if we are anti-green? Do we not lose sight of where the real costs are? After all, we should remember that our economic system is part of the natural environment, and not the other way around.

#energiewende here we come!



In a previous comment I discussed some thoughts of Paul Krugman and Matthew Kahn on why US Republicans are so hawkishly opposing any environmental regulation. I add some thoughts of my own to this HERE but still felt somewhat unsatisfied. And decided to take all this to the data. You wouldn’t expect my surprise when I found the following.

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Paul Krugman and Matthew Kahn provide some thoughts on why US Republicans are so hawkishly opposing any environmental regulation. I add some thoughts of my own to this.

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A new report, by order of the European Commission, studying the Subsidies and costs of EU energy just came out (published by Ecofys. KPMG and the Centre for Social and Economic Research). This study is particular noteworthy since it is one of the first that attempts to provide useful data on energy costs and subsidies for all EU Member States and for all technologies. Here is a quick summary of the most interesting findings as well as some thoughts and discussions.

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THIS is the currently latest version of the previously entitled paper `An Aggregation Dilemma’. I thank especially Reyer Gerlagh, Humberto Llavador and Gwenaël Piaser for extensive discussions and comments.

The results in this paper show that a policy maker who ignores regional data and instead relies on aggregated integrated assessment models will strongly underestimate the carbon price and thus the required climate policy. Using a stylized theoretical model we show that, under the mild and widely-accepted assumptions of asymmetric climate change impacts and declining marginal utility, an Aggregation Dilemma may arise that dwarfs most other policy-relevant aspects in the  climate change cost-benefit analysis. Estimates based on the RICE model (Nordhaus and Boyer 2000) suggest that aggregation leads to around 26% higher total world emissions than those from a regional model. The backstop energy use would be zero in aggregated versions of the model, while it is roughly 1.3% of Gross World Product in the regionally-disaggregated models.
Though the policy recommendations from fully aggregated models like the DICE model are always used as a benchmark for policy making, the results here suggest that this should be done with the reservations raised by the Aggregation Dilemma in mind.

For anyone interested, please feel free to comment.

In a recent article on Project Syndicate entitled “Carbon Majors and Climate Justice“, Naderev (Yeb) Saño and Julie-Anne Richards suggest that fossil-fuel entities should be taxed, envoking the polluter pays principle. They note that

It seems only fair and reasonable, therefore, that all fossil-fuel entities, but especially the carbon majors, pay a levy on each ton of coal, barrel of oil, or cubic meter of gas they produce to a new International Mechanism for Loss and Damage, which would help to fund efforts to address the worst effects of climate change. Furthermore, given that the effects of climate change today are the result of past emissions, the carbon majors should pay a historical levy, too.

According to the authors, the money raised should then be used for e.g. climate-vulnerable countries, or disaster preparation.

There are, however, four points that one may advance against this idea.

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One topic I am particularly interested in is ecolabels, basically the labeling of products to ascertain their environmental standards. In this respect, the European Commission is now launching a Public Consultation on ecolabels entitled “Evaluation of the Implementation of the EU Eco-label Regulation”.

They question policy makers, stakeholders, producers and consumers about their views on the EU Ecolabel. I urge everyone to reply to their survey, which you can do via this link: It should take roughly 5 minutes to reply. This is your opportunity to help shape legislation in Europe.

One of the more interesting questions in the survey was this: “Is it beneficial to have a set of common requirements in the pursuit for a single market for green products across Europe in the form of the EU Ecolabel?”

Clearly, one issue with the whole ecolabel business right now is the huge diversity of ecolabels and the differences in their requirements. They increase the uncertainty of the consumer and at the same time help producers to sell their products by apparently attaching an ecolabel to them but with potentially very weak requirements. This is, however, simply weakening ecolabels altogether. Given the range of products and labels available, policy makers cannot expect consumers to take the significant amount of time needed to study the various ecolabels that are out there. Thus, it is reasonable to expect that consumers, faced with this uncertainty, may simply turn to pricing decisions again since the ecolabel loses its product differentiation character. Hence, standards/regulations should be applied uniformly.

Interested readers in cars and ecolabeling can take a look HERE, those interested in ecolabeling more generally can look HERE (in German). Those interested in some academic work on ecolabels can look HERE.


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