Social Discount Rate For Climate Change

Recalculating the Costs of Global Climate Change
December 14, 2006 -- By Hal Varian, NY Times, via Economist's View

The Stern Review on the Economics of Climate Change ... became front-page news because of its striking conclusion that we should immediately invest 1 percent of ... global gross domestic product ... to reduce the impact of global warming. The British report warned that failing to do so could risk future economic damages equivalent to a reduction of up to 20 percent in global G.D.P.

These figures are substantially higher than earlier estimates.., and environmental economists have studied the 700-page report to try to figure out why the numbers are so large.

Recently two noted economists, William D. Nordhaus of Yale and Sir Partha Dasgupta of the University of Cambridge, have written critiques of the Stern report that try to solve this puzzle. ... The two critiques emphasize different but related aspects of the Stern Review’s economic model.

Mr. Nordhaus’s major concern is with the Stern Review’s choice of the “social rate of time discount,” the rate used to compare the well-being of future generations to the well-being of those alive today. ... Some very intelligent people have argued that giving future generations less weight than the current generation is “ethically indefensible.” Other equally intelligent people have argued that weighting generations equally leads to paradoxical and even nonsensical results.

The Stern Review sides with those who believe in a low discount rate, arguing that the only ethical reason to discount future generations is that they might not be there at all ... The report assumes that the probability of extinction is 0.1 percent per year. For all intents and purposes, this implies a social rate of discount that is effectively zero, implying almost equal weight to all generations.

The report ... also makes an extreme choice when specifying the relationship between consumption and welfare. These choices together imply that a 1 percent reduction in consumption today is desirable if it leads to slightly more than 1 percent increase in the consumption of some future generation, even though, in the model, future generations will be much wealthier than the current generation.

Given these assumptions it is easy to see where the large numbers come from. Unchecked global warming will certainly make future generations worse off to some degree. If we add up these losses over all time using a zero social discount rate, we get a large sum: a dollar a year over a million years is a million dollars.

Mr. Nordhaus examines a model of climate change that is similar to the one used in the Stern Review but with a 3 percent social discount rate that slowly declines to 1 percent in 300 years rather than the 0.1 percent discount rate used in the Stern Review. In his model, the welfare of future generations is given less weight than the current generation’s welfare. He finds that preventive measures like a tax on carbon emissions are certainly required. But they are of a much smaller magnitude than those recommended in the report. ...

So, should the social discount rate be 0.1 percent, as Sir Nicholas Stern, who led the study, would have it, or 3 percent as Mr. Nordhaus prefers? There is no definitive answer to this question because it is inherently an ethical judgment that requires comparing the well-being of different people: those alive today and those alive in 50 or 100 years.

Still, we may at least ask for consistency... Forget about global warming and consider the much simpler problem of economic growth. How much should we save today to bequeath to future generations if we really believed in a 0.1 percent social discount rate and the other assumptions built into the Stern model? The answer, according to Sir Partha’s calculation, is that we should invest 97.5 percent of what we produce today to increase the standard of living of future generations.

Sir Partha’s stripped-down model leaves out uncertainty, technological change and population growth, but even so, such a high savings rate is totally implausible.

It is even more implausible given that future generations will be much richer than those now living. According to Mr. Nordhaus, the assumptions used in the Stern Review imply that per capita yearly consumption in 2200 will be $94,000 as compared with $7,000 today. So, is it really ethical to transfer wealth from someone making $7,000 a year to someone making $94,000 a year?

As these examples illustrate, the choice of an appropriate policy toward global warming depends heavily on how one weighs the costs and benefits it imposes on different generations. ...

Carbon Sink Ability of Forests Depends on Location

Care needed with carbon offsets
December 15, 2006 -- By Jonathan Amos, BBC News

Planting forests to combat global warming may be a waste of time, especially if those trees are at high latitudes, new research suggests.

Scientists say the benefits that come from trees reducing atmospheric carbon dioxide can be outweighed by their capacity to trap heat near the ground.

Computer modelling indicates that trees only really work to cool the planet if they are planted in the tropics.

The research has been discussed at an American Geophysical Union meeting.

"What we have found is in the so-called mid-latitude region where the United States is located and majority of European countries are located, the climate benefits of planting will be nearly zero," said ecologist Govindasamy Bala of Lawrence Livermore National Laboratory.

"[In] the seasonally snow-covered regions [at even higher latitudes], planting new trees could be actually counter-productive," he told BBC News.

Growing issue

Dr Bala and colleague Ken Caldeira, from the Carnegie Institution of Washington, used a computer model to determine the impact which forests in different parts of the planet would have on temperature.

Their analysis indicates that three key factors are involved:

1.) Forests can cool the planet by absorbing the greenhouse gas carbon dioxide during photosynthesis

2.) They can also cool the planet by evaporating water to the atmosphere and increasing cloudiness; a deck of white clouds reflects incoming solar radiation straight back out into space

3.) Trees can also have a warming effect because they are dark and absorb a lot of sunlight, holding heat near ground level "Our study shows that tropical forests are very beneficial to the climate because they take up carbon and increase cloudiness, which in turn helps cool the planet," explained Dr Bala.

The further you move from the equator, though, these gains are eroded; and the team's modelling predicts that planting more trees in mid- and high-latitude locations could lead to a net warming of a few degrees by the year 2100.

"The darkening of the surface by new forest canopies in the high-latitude boreal regions allows absorption of more sunlight that helps to warm the surface," Dr Bala said.

"In fact, planting more trees in high latitudes could be counterproductive from a climate perspective."

The study finds little or no climate benefit when trees are planted in temperate regions.

The scientists warn that many schemes designed to offset emissions of carbon by planting trees may not be appropriate.

"When you plant trees to slow down global warming, you have to be careful where you do it. I think our study shows clearly the climate benefits are maximised if you plant them in the tropics," Dr Bala told BBC News.

Airlines Waste Profits & Resources

Study Shows Airline Industry Could Save Thousands of Dollars by Recycling
December 14, 2006 -- By Associated Press via ENN

WASHINGTON -- The airline industry wastes hundreds of thousands of dollars each year by discarding 4,250 tons of aluminum cans and other items that could be recycled, a new report says.

The two-year study by the Natural Resources Defense Council examined recycling efforts at 30 U.S. airports. The report found that the industry threw out 9,000 tons of plastic and enough newspapers and magazines to fill a football field to a depth of more than 230 feet.

"Airlines in the U.S. throw away enough aluminum cans every year to build 58 new 747s," said Allen Hershkowitz, a senior scientist at NRDC. "Along with a huge amount of recyclable waste, the industry is throwing away a significant amount of money."

Other findings:

- Airports put out about 1.28 pounds of waste per passenger in 2004, about one-third of the total amount Americans generate in an entire day.

- Recycling 70 percent of the aluminum cans currently discarded would save the amount of energy used by 5,000 U.S. households in a year.

- Aluminum accounts for 1 percent of the air travel industry's waste stream. But the energy benefits of recycling one ton of the substance are 11 times that of recycling one ton of newspaper and eight times that of recycling the same amount of plastic.

The report called for better recycling programs. It cited cost savings of more than $100,000 a year at airports in Seattle-Tacoma and Baltimore, whose programs include sending used coffee grounds to a compost facility instead of the dump.

Environmental Analysis of Forest Plans No Longer Required

Forest Service Says No More Environmental Analysis of Forest Plans
December 13, 2006 -- By Jeff Barnard, Associated Press via ENN

GRANTS PASS, Ore. -- Long-term management plans for national forests will no longer go through a formal environmental impact statement, the U.S. Forest Service announced Tuesday.

The Forest Service said writing the 15-year plans has no effect on the environment, making the impact statements unnecessary. That conclusion was based on changes to forest planning rules made last year and a past U.S. Supreme Court ruling that says a plan is a statement of intent and does not cause anything to happen.

Individual projects, such as logging, were cut out of forest management plans in last year's rule changes. Those projects will still have to go through a formal analysis under the National Environmental Policy Act, known as NEPA, said Fred Norbury, associate deputy chief for the national forest system.

Norbury said cutting the environmental impact statement process out of the management plans should shorten the time to produce them to about three years, he said.

Plans now take five to seven years to write, at a cost of $5 million to $7 million.

Rep. Nick J. Rahall, D-W.Va., the incoming House Resources Committee chairman, said the new rules are part of a continuing effort by the Bush administration to reduce wildlife and watershed protections and make it harder for the public to challenge illegal logging.

Conservation groups accused the Bush administration of trying to undercut NEPA, which requires agencies to take a hard look at environmental impacts of their projects and include the public in the decisions.

Tuesday's decision ignores "that forest plans make real decisions," Marty Haden, legislative director for Earthjustice, said from Washington, D.C. "Forest plans zone the forests -- what areas are open to or closed to logging, what areas are open to off-road vehicle use, what areas are open to back-country recreation, and lots of other issues."

Haden said a court challenge of the new forest planning rules was likely.

Chris West, vice president of the American Forest Resource Council, a timber industry group, said he thought the new rule was overdue.

"Wasting time and money, especially court time, on a broad general plan is not in the public interest," West said.

NEPA has been a powerful law for conservation groups challenging Bush administration forest policy. A recent federal court ruling that overturned changes to rules banning most logging in inventoried roadless areas cited the lack of environmental impact statement as required by NEPA.

There are 125 national forests and national grasslands, all of which prepare 15-year management plans.

Until last year, they were a list of 15 years' worth of projects, and an environmental impact statement analyzing them. Then the Bush administration made the forest plans more broad-based, focusing on how to improve forest health and restore forests burned by wildfire, and took out the individual projects, Norbury said.

"The Creation, An Appeal to Save Life on Earth" by E.O. Wilson

Harvard Biologist Extends Olive Branch to Evangelicals
November 16, 2006 -- By Jeff Barnard, Associated Press via ENN

Harvard biologist Edward O. Wilson might normally arouse suspicion among evangelicals, given his faith in science over Scripture.

But in his latest book, "The Creation, An Appeal to Save Life on Earth," the two-time Pulitzer Prize winner extends an olive branch to Christian believers in hopes of saving the Earth from the biggest mass extinction since the dinosaurs.

Wilson's book is the latest attempt to bridge the gap between evolutionary science and a literal interpretation of the Bible, a rift dating back to Charles Darwin's theory of natural selection.

"Pastor, we need your help. The Creation -- living Nature -- is in deep trouble," Wilson writes in this letter to an imaginary Southern Baptist pastor. "You might well ask at this point, Why me? Because religion and science are the two most powerful forces in the world today."

R. Albert Mohler Jr., president of the Southern Baptist Theological Seminary, is a longtime reader of Wilson's work on sociobiology, and was initially impressed by Wilson's honesty in the book, but has since grown skeptical of Wilson's motives after not seeing any concrete contacts with evangelicals since the book came out in September -- contacts Wilson says are coming.

"E.O. Wilson did not write that book to evangelicals," Mohler said from his office in Louisville, Ky. "He wrote it to his fellow naturalists as a way of encouraging them to find a public relations strategy to reach out to a broader constituency.

"I don't think humanity can bring the world to an end. The fundamental judgment we must fear is the judgment of the creator. When he comes in judgment, certain ecological sins will be among the sins for which he calls us to account. That is not in Scripture the pre-eminent issue. That is where we have to reject E.O. Wilson and his policy."

Indeed, many evangelical leaders have rejected environmental efforts, arguing that it's important to stay focused on core social issues such as stopping abortion and opposing gay marriage.

But among the evangelical wing that has become more concerned about environmental issues in recent years, the reception has been enthusiastic. Calvin DeWitt, a professor of environmental studies at the University of Wisconsin and a founder of the Evangelical Environmental Network, said Wilson's book would restore the term "creation" to scientific discussion.

Richard Cizik, vice president of governmental affairs of the National Association of Evangelicals, which represents 45,000 churches, gave a copy to Iranian President Mahmoud Ahmadinejad last September, when Ahmadinejad addressed the United Nations.

"I think (Wilson) has been courageous to come forward, and we need to be equally courageous," said Cizik. Though the issue of protecting all life on Earth has been the most controversial he has faced, "We will not allow this to be ignored."

Wilson, 77, grew up in Alabama and Florida as a Southern Baptist. He is an entomologist, specializing in ants, but for many years taught a general course in biology at Harvard, where he is a professor emeritus. He has written 20 books, many of them about the diversity of life on Earth, the dangers of mass extinction from human development, the psychological need for humans to be part of nature, and the role of religion in society.

Written with pen on yellow legal pads at home and on airplanes traveling to speaking engagements, "The Creation" started as a general view of where biology was going in the 21st century, but turned, at the prodding of W.W. Norton editor Bob Weil, into an appeal to a Southern Baptist pastor.

"From my vantage point, we are going to destroy half the species of plants and animals by the end of this century unless we can abate the destructive part of that activity," Wilson said from his home in Lexington, Mass.

"In the environmental community, we've been preaching to the choir on one side, and not presenting a very friendly face to the vast American religious audience on the other side.

"I thought it was just supremely logical that we could get together on middle ground, neutral ground."

The book appears to have found an audience. It made Amazon.com's top ten lists in religion and science, and Weil reports it has gone to a fourth printing.

Though Wilson lost his faith as he grew to be a scientist, this is not an attack on religion, like the current best-sellers "The God Delusion" by Oxford professor Richard Dawkins or "Letter to a Christian Nation," by Stanford University philosopher Sam Harris.

"For you, the glory of the unseen divinity: for me the glory of the universe revealed at last," Wilson writes. "For you, the belief in God made flesh to save mankind; for me the belief in Promethean fire seized to set men free."

Wilson's fears of an impending ecological disaster are no isolated view. For example, a 1998 survey of 400 scientists commissioned by New York's American Museum of Natural History found most were convinced that the sixth great extinction of plants and animals on Earth was under way.

The root cause is human overpopulation, which leads to habitat loss, climate change, invasive species, pollution, and over-harvesting, Wilson writes.

Wilson argues the financial sacrifice to change the equation would not be great. Studies estimate a one-time payment of $30 billion -- a tenth of 1 percent of gross world product and 8 percent of the cost to date of the war in Iraq -- would protect habitat for 70 percent of the world's plants and animals on land.

"I think Ed has really hit a very rich vein of thought with his book," said Peter Raven, president of the Missouri Botanical Garden, professor of botany at Washington University in St. Louis, and a science adviser to the Vatican. "The notion was very well received by theologians and others at a meeting I just attended in Chicago."

That was the conference, "Without Nature? A New Condition for Theology," held in October at University of Chicago Divinity School -- a sign of how popular environmental issues have become.

Paul Gorman, executive director of the National Religious Partnership for the Environment, noted that Roman Catholic bishops around the country will be mailing out materials on global warming to their diocese, and hundreds of synagogues will be replacing light bulbs with florescents for Hanukkah.

Wilson said the midterm elections that put Democrats in control of Congress could help bring science and religion even closer together.

"With the political right, especially expressed through the present White House, generally indifferent to the contribution of science to key issues, maybe now there will be a potential for a friendlier relationship between religious conservatives and scientists," Wilson said.

Europen Union Carbon Market Facts

Factbox: What is the European Emissions Trading Scheme?
November 29, 2006 -- Planet Ark

On Wednesday the European Commission gets the chance to take a tough line on climate change by rejecting several member states' proposed carbon emissions plans for 2008-12, which most analysts say are too lax.

Below are some key facts about the European Union's carbon market.

** The EU's carbon market is the 25-nation bloc's main weapon against climate change and is meant to put a price on emissions of carbon dioxide (CO2) and so motivate industry to look for clean sources of energy.

** CO2 is one of several greenhouse gases that trap heat in the atmosphere and are expected to contribute to potentially catastrophic climate change -- including droughts, floods and heatwaves -- by 2100, if emissions continue unchecked.

** CO2 is a by-product of burning fossil fuels like coal, oil and gas for power and transport. Alternative sources of energy like biofuels, wind, solar and nuclear have much lower or zero CO2 emissions.

** Europe's carbon trading scheme launched in 2005 and covers almost half of the European Union's CO2 emissions, from energy-intensive sectors including power, pulp, paper, ferrous metals, oil, gas, cement, lime and glass.

** The scheme is meant to drive down CO2 emissions and so help the EU meet its Kyoto Protocol target of cutting its greenhouse gas emissions by 8 percent by 2012 versus 1990 levels.

** The EU scheme works on a "Cap and Trade" basis -- each installation covered by the scheme gets a certain quota of emissions permits and they can buy or sell permits depending on whether they exceed or undercut that quota. There is an overall European quota cap which cannot be exceeded.

** Installations must surrender by 30 April each year the number of permits equalling their total emissions for the preceding calendar year.

** In its first phase from 2005-07, the European market allocated permits allowing 2.19 billion tonnes of carbon dioxide emissions per year from some 11,428 industrial installations across some 25 EU member states.

** In 2005 actual emissions were roughly some 1.97 billion tonnes, meaning there was a surplus of permits which sent carbon prices crashing in April and May this year, when the surplus was revealed.

** Emissions permits for December 2006 delivery traded at some 30 euros ($39.41) in April 2006, but subsequently crashed and were trading at 8.5 euros on the European Climate Exchange on Tuesday.

** On Wednesday the European Commission gets the chance to restore a higher carbon price for the second phase of the market from 2008-12 by rejecting member states' proposed future emissions plans, which most analysts say are too lax.

** According to the World Bank, the EU carbon market traded some 764 million tonnes of emissions permits worth $18.8 billion in the first nine months of 2006, versus 324 million tonnes worth $8.2 billion in the whole of 2005, the market's first year.

Throwaway Economy In Trouble

Eco-Economy Update: Plan B 2.0 -- Book Byte
November 30, 2006 -- By Lester R. Brown, Earth Policy Institute

One of the distinctly unhealthy economic trends over the last half-century has been the emergence of a throwaway economy. First conceived following World War II as a way of providing consumers with products, it soon came to be seen also as a vehicle for creating jobs and sustaining economic growth. The more goods produced and discarded, the reasoning went, the more jobs there would be.

What sold throwaways was their convenience. For example, rather than washing cloth towels or napkins, consumers welcomed disposable paper versions. Thus we have substituted facial tissues for handkerchiefs, disposable paper towels for hand towels, disposable table napkins for cloth ones, and throwaway beverage containers for refillable ones. Even the shopping bags we use to carry home throwaway products become part of the garbage flow.

This one-way economy depends on cheap energy. It is also facilitated by what are known in the United States as municipal solid waste management systems. Helen Spiegelman and Bill Sheehan of the Product Policy Institute write that these “have become a perverse public subsidy for the Throwaway Society. More and better waste management at public expense is giving unlimited license to proliferate discards. Today these systems collect 3.4 pounds of product waste a day for each American man, woman, and child—twice as much as in 1960 and ten times as much as 100 years ago. It is time to revamp the system so that it no longer supports the throwaway habit.”

The throwaway economy is on a collision course with the earth’s geological limits. Aside from running out of landfills near cities, the world is also fast running out of the cheap oil that is used to manufacture and transport throwaway products. Perhaps more fundamentally, there is not enough readily accessible lead, tin, copper, iron ore, or bauxite to sustain the throwaway economy beyond another two or three generations. Assuming an annual 2-percent growth in extraction, U.S. Geological Survey data on current economically recoverable reserves show the world has 18 years of reserves remaining for lead, 20 years for tin, 25 years for copper, 64 years for iron ore, and 69 years for bauxite.

The cost of hauling garbage from cities is rising as nearby landfills fill up and the price of oil climbs. One of the first major cities to exhaust its locally available landfills was New York. When the Fresh Kills landfill, the local destination for New York’s garbage, was permanently closed in March 2001, the city found itself hauling garbage to landfill sites in New Jersey, Pennsylvania, and even Virginia—with some of the sites being 300 miles away.

Given the 12,000 tons of garbage produced each day in New York and assuming a load of 20 tons of garbage for each of the tractor-trailers used for the long-distance hauling, some 600 rigs are needed to move garbage from New York City daily. These tractor-trailers form a convoy nearly nine miles long—impeding traffic, polluting the air, and raising carbon emissions. This daily convoy led Deputy Mayor Joseph J. Lhota, who supervised the Fresh Kills shutdown, to observe that getting rid of the city’s trash is now “like a military-style operation on a daily basis.”

Fiscally strapped local communities in other states are willing to take New York’s garbage—if they are paid enough. Some see it as an economic bonanza. State governments, however, are saddled with increased road maintenance costs, traffic congestion, increased air pollution, noise, potential water pollution from landfill leakage, and complaints from nearby communities.

Virginia Governor Jim Gilmore wrote to Mayor Rudy Giuliani in 2001 complaining about the use of Virginia as a dumping ground. “I understand the problem New York faces,” he noted, “but the home state of Washington, Jefferson and Madison has no intention of becoming New York’s dumping ground.”

Garbage travails are not limited to New York City. Toronto, Canada’s largest city, closed its last remaining landfill on December 31, 2002, and now ships all its 1.1-million-ton-per-year garbage to Wayne County, Michigan. Ironically, the state of New Jersey, the recipient of some of New York’s waste, is now shipping up to 1,000 tons of demolition debris 600 miles—also to Wayne County in Michigan.

The challenge is to replace the throwaway economy with a reduce-reuse-recycle economy. For cities like New York, the challenge should be less what to do with the garbage and more of how to avoid producing it in the first place.