Economics – Page 107 – a sibilant intake of breath

Population control in the rich world

There is a lot of talk about reproductive choice in the developing world, and it is extremely important. All human beings have the right to engage in sexual activity on the basis of their free choices and have children only when it is their will to do so. It is an important role of the state to ensure that those rights are not violated.

That being said, there seems to be a disjuncture between concern about rising populations in the developing world and environmental problems. All else being equal, more humans tends to mean more threats to the ecosystems that sustain us. Of course, not all else is equal. People in rich states consume dramatically more resources than those in poor ones. This is true in terms of energy resources (oil, coal, gas, uranium), food resources (especially meat), and climatic impact.

Certainly, we should work to give reproductive control to people (especially women) living in developing states. However, given the concerning destruction of the natural world, does it not make sense to reduce policies that encourage reproduction in rich states? I am not advocating mandatory limits on bearing children. I am simply suggesting that it may be prudent to reduce the degree to which taxpayers in general subsidize those who choose to breed. Even with ample fossil fuels, the world is groaning and straining because of the current human population – especially those who live especially unsustainable lives in rich states. When we reach the point where those fuels are depleted – or when we refrain from using them due to climate concerns – energy intensive lifestyles will become even more unsustainable.

Increasing the cost of children may be an important mechanism for improving the welfare of future generations. No child deserves to live in poverty, but parents who choose to reproduce deserve to bear the great majority of the costs of doing so.

Pick your poison: nuclear or ‘clean coal’

One issue raised at the conference I recently attended was this: both Ontario and Germany are in the position where they want to phase out coal-fired power plants. In addition, Germany has decided to phase out nuclear power, whereas Ontario is strongly considering maintaining and expanding existing facilities. In order to phase out nuclear without continuing to rely on dirty coal, one presenter asserted that carbon capture and storage (CCS) on coal plants is the only feasible and politically acceptable option.

Assuming for the moment that maintaining adequate energy supplies in the near-term requires one or the other, which is the more suitable choice? With nuclear, the risks are largely known and the biggest uncertainties relate to costs. With CCS, there are huge uncertainties about cost, alongside big uncertainties about safety, scale, and feasibility. The worst you get with nuclear is a lot of wasted taxpayer money, more nuclear proliferation, contaminated sites, and some accidents. The worst you get by relying on CCS is wasted money, accidents, proliferation of coal plants, and the extension of the high-carbon phase in whatever countries bet wrongly that it will work.

To me, if the choice is exclusively between nuclear fission and CCS right now, it seems that nuclear is the most risk-averse option. That being said, the calculation may change a great deal when you factor in opportunities for conserving power, using it more efficiently, and generating it using renewables. That won’t make CCS more attractive, relative to nuclear, but it may mean we are presented with a less stark choice than was assumed at the outset of this discussion.

Defending the Netherlands from flooding

Among rich states, none is more threatened by sea level rise than the Netherlands. Their plans are reflective of this. Following the terrible flood of 1953, they began their Delta Works scheme for protection against storms. Now, they are contemplating how to modify that system to deal with at least 200 years of rising sea levels.

As such, they are planning to deal with 0.5 to 1 metre of sea level rise by 2100, and by 2 to 4 metres by 2200. The scheme to deal with this is expected to cost 1.2 to 1.6 billion Euros a year, between now and 2050. One can only speculate about the human and material costs of extending such defences to all the areas around the world that would be affected by such climatic changes.

Insurance, liability, and climate change adaptation

Yesterday, I saw a fascinating presentation by Dianne Saxe: a lawyer who explained the legal liabilities that could arise as the result of climate change. The particular focus was on the government, and ways in which failure to effectively adapt to climate change could produce a legal risk. For instance, the government might be sued for failing to establish building standards that reflect our understanding that extreme weather events will get worse.

Legal liability and insurance are definitely very important elements of the climate change problem. Insurance companies probably have the most reason of anyone to get the most accurate and precise estimates about the various future impacts of climate change. In a world where mitigation does not occur rapidly enough, they will certainly find themselves with a lot of extreme new risks threatening their profitability: especially given how many of the probable impacts of climate change are included in existing property insurance. Climatic change that produces more intense windstorms is a major issue for you if you insure millions of houses and your policies include coverage for wind damage.

Arguably, the insurance industry and society-wide concerns about liability could be a good motivating force for making society more resilient to climate change. That is especially true when there is an opportunity to create price incentives: charging more (or refusing to offer coverage) for houses in hurricane zones, offering reduced premiums for houses built to withstand projected changes, and so forth. Of course, lots of ethical issues arise in connection with the governmental role. Sometimes, it is quite legitimate for government to step in and mandate that insurance be provided to a certain group, or for a reasonable price. At other times, such interventions undermine the ability of insurers to encourage sensible behaviour.

It will be a very interesting area to watch: both in terms of the commercial decisions taken by insurance companies and in relation to court cases and new precedents that arise.

Ethical meat

Many times before, I have written about the ethics of meat consumption. Critical issues include the health and environmental impacts of factory farming, greenhouse gas emissions, and the perverse ways in which animals are made to live contrary to their natures. All that being said, I think it is actually more ethical to spend the time and money to seek out ethical meat, rather than simply choosing not to eat it at all.

Agriculture is an industry in which a whole range of choices exist: from the solar-powered grass-based agriculture so well advocated by Michael Pollan to the hydrocarbon-fueled and unsustainable forms that dominate in most of the world today. While choosing vegetarianism means taking a stance against the former, it seems likely to be more positive overall to provide active support to a positive alternative. The pike Emily and I enjoyed while canoe camping partially embodied this approach – though there is a difference between seeking ethical self-sufficiency and trying to help the emergence of ethical industries.

Do readers agree? Does anyone have experience trying to acquire ethical meat in Ottawa?

Stern on the opportunities in recession

Nicholas Stern – most notably the author of an eponymous report on the economics of climate change for the British government – has a piece in The Guardian arguing that the financial turmoil ongoing around the world provides an opportunity to refocus investment on low-carbon options:

The International Energy Agency estimates that world energy infrastructure investments are likely to average about $1 trillion a year over the next 20 years. If the majority of this is low-carbon, and some of it is brought forward, it will be an outstanding source of investment demand. So too will be the investments for energy efficiency, many of which can be labour-intensive and are available immediately.

It makes sense to highlight how the current pause in headlong, high-carbon growth can help us to reorient the global economy. Stabilizing climate requires a constant commitment to reducing emissions: not one that wavers when growth seems to strong to resist or too weak to threaten.

The GAO on carbon capture and storage

The American Government Accountability Office has released a report (PDF) on carbon capture and storage (CCS). Some key points:

To make a significant contribution to fighting climate change, the International Energy Agency estimates that 6,000 CCS facilities would be required, each storing one million tonnes of carbon dioxide per year.
Integrating CCS into existing coal plants is very expensive and difficult.
It is easier with integrated gasification combined cycle (IGCC) plants, but they are very expensive before you even take CCS into account.
Commercial scale IGCC plants (not necessarily with CCS) can’t be expected before 2020 – 5 years after global CO2 emissions need to peak.
Coal plants with CCS will produce 35% – 77% less electricity than those without.
There are questions about the long-term viability of storing carbon underground.
Leaks could contaminate water and suffocate people.
CCS will only be deployed if companies are forced to use it.

In short, people who are counting on CCS to make a big contribution to fighting climate change have a lot to prove, and cannot be reasonably permitted to assume the near-term emergence of the technology as a viable, low-cost option. Until CCS is shown to be safe and feasible on a commercial scale, we simply cannot allow new coal power plants in countries that are serious about dealing with climate change.

I found out about it via Gristmill.

MEC to sell bikes

It seems that Mountain Equipment Co-op (MEC) is getting into the business of making and selling bikes. This seems like good news for three major reasons:

MEC is distinguished by having an excellent and knowledgeable staff concerned with finding the best option for you, rather than earning a commission or even maximizing the profits of the store.
MEC has a history of developing their own products, which are generally of good quality and excellent value. They aren’t as good as top-of-the-line equipment from certain other manufacturers, but they are often nearly as good and half the price.
MEC seems to take ethical and environmental issues into consideration very seriously.

In short, I look forward to seeing what they produce (not that I need a bike right now. I am still delighted with my Trek 7.3 hybrid).

Resource types and the resource curse

As discussed before, the ‘resource curse’ hypothesis holds that the presence of valuable resources can sometimes reduce the security of states, since it offers up a prize to anyone capable of seizing them. A bit of recent research has added nuance to the picture. By looking at the long-running civil war in Columbia, the authors were able to look at periods when coffee (a labour intense crop) and oil (a capital intense crop) rose and fell in value:

Using newspaper reports of violent skirmishes in 950 Colombian municipalities between 1988 and 2005, Dube and Vargas find that when coffee prices went up, violence went down in locations where a large fraction of land area was under coffee cultivation. When coffee prices fell, however, as they did by almost 70 percent in the late 1990s, violence in coffee areas rose dramatically. The researchers estimate that an additional 500 deaths may have resulted from the increased conflict that came from lower coffee prices. The opposite was true for oil: It was higher prices that intensified conflict in areas with productive oil wells or pipelines. (Since both coffee and oil prices are traded in global markets, it is unlikely that price increases were caused by panicking commodities traders spooked by increased civil-war violence in Colombia.)

One suggestion that arises is not unfamiliar: establish strong governance regimes in states with capital intensive resources. It is far better to be like Norway, using resource income transparently and putting aside a share of the oil revenues for the benefit of future generations, than like Nigeria, long mired in conflict as different groups compete for resource wealth.

On the labour intensive side, the proposal is a bit more novel: provide international aid to stabilize commodity prices in conflict-prone states. There are those who argue that a 50% drop in coffee prices helped cause the Rwandan genocide. Surely, the economic cost of temporarily bolstering commodity prices in delicate states is less than the probable cost of re-establishing security and resuming development after an internal conflict. The difference between the economic cost and the moral cost of inaction is probably greater still.

Accounting for changes in sinks

It is highly likely that any successor to the Kyoto Protocol negotiated in the next couple of years will include targets based on emissions produced directly by human activities. That means any emissions associated with melting permafrosts, accelerated decay in peatlands, or dried out forests would not be included in the overall total. This is pretty worrisome, given that the climate doesn’t care about the origin of emissions. We could conceivably meet out target for anthropogenic emissions while nonetheless putting far more greenhouse gas into the atmosphere than would be wise.

At the same time, it wouldn’t be fair to penalize only the country where the second-order emissions get produced. If the Amazon dries out due to climate change, it is not entirely or even mostly the fault of Brazil. The fairest course of action seems to be:

Come up with a hard global target for both direct human emissions and those induced by climate change itself.
Assign the direct emissions to the states producing them.
Divide up the secondary emissions and assign them to each country according to their total historical contribution to climate change.

That means if Canada has emitted about 2% of all the anthropogenic greenhouse gasses in the atmosphere, we would be responsible for 2% of induced emissions coming out of the permafrost in Canada and Siberia, the drying of the Amazon, etc. That way, the polluter is paying, albeit belatedly, and the focus remains the actual amount of greenhouse gas entering the atmosphere, which is the critical determinant in what will happen to the climate.