Costs of Climate Policy when Pollution Affects Health and Labour Productivity. A general Equilibrium Analysis Applied to Sweden

Much of the debate over global climate change involves estimates of the direct costs of global climate change mitigation. Recently this debate has included the issue of ancillary benefits. These benefits consist mainly of health improvements. Although it is generally acknowledged that air pollution affects respiratory health, and that valuations of these impacts make up a significant proportion of the damage costs of air pollution, these impacts are often neglected when evaluating the costs of climate policy. Since reducing greenhouse gases has the effect of also reducing other pollutants affecting human health and labour productivity these effects should be taken into consideration. The analysis incorporates a linkage between air pollution and health effects into a general equilibrium model for Sweden through a theoretical consistent framework. Results from recent Swedish concentration-response and contingent valuation studies are used to model direct disutility and indirect health effects that negatively affects the productivity of labour. The costs of feedback effects on health and productivity are compared in three different scenarios for attaining the Swedish carbon dioxide target with alternative projected emission levels in the baseline scenario as well as alternative harmful emission levels. Results show that not including feedback effects could mean overstating the costs of climate policy. The magnitude of these effects are, however, very sensitive to projected emission levels and to the judgement of harmful emission levels.air pollution; ancillary benefits; climate policy; general equilibrium; health

Modelling Dynamic Conditional Correlations in WTI Oil Forward and Futures Returns

This paper estimates the dynamic conditional correlations in the returns on WTI oil one-month forward prices, and one-, three-, six-, and twelve-month futures prices, using recently developed multivariate conditional volatility models. The dynamic correlations enable a determination of whether the forward and various futures returns are substitutes or complements, which are crucial for deciding whether or not to hedge against unforeseen circumstances. The models are estimated using daily data on WTI oil forward and futures prices, and their associated returns, from 3 January 1985 to 16 January 2004. At the univariate level, the estimates are statistically significant, with the occasional asymmetric effect in which negative shocks have a greater impact on volatility than positive shocks. In all cases, both the short- and long-run persistence of shocks are statistically significant. Among the five returns, there are ten conditional correlations, with the highest estimate of constant conditional correlation being 0.975 between the volatilities of the three-month and six-month futures returns, and the lowest being 0.656 between the volatilities of the forward and twelve-month futures returns. The dynamic conditional correlations can vary dramatically, being negative in four of ten cases and being close to zero in another five cases. Only in the case of the dynamic volatilities of the three-month and six-month futures returns is the range of variation relatively narrow, namely (0.832, 0.996). Thus, in general, the dynamic volatilities in the returns in the WTI oil forward and future prices can be either independent or interdependent over time.Constant conditional correlations, Dynamic conditional correlations, Multivariate GARCH models, Forward prices and returns, Futures prices and returns, WTI oil prices

Surface Emissions Modulate Indoor SVOC Concentrations through Volatility-Dependent Partitioning.

Measurements by semivolatile thermal desorption aerosol gas chromatography (SV-TAG) were used to investigate how semivolatile organic compounds (SVOCs) partition among indoor reservoirs in (1) a manufactured test house under controlled conditions (HOMEChem campaign) and (2) a single-family residence when vacant (H2 campaign). Data for phthalate diesters and siloxanes suggest that volatility-dependent partitioning processes modulate airborne SVOC concentrations through interactions with surface-laden condensed-phase reservoirs. Airborne concentrations of SVOCs with vapor pressures in the range of C13 to C23 alkanes were observed to be correlated with indoor air temperature. Observed temperature dependencies were quantitatively similar to theoretical predictions that assumed a surface-air boundary layer with equilibrium partitioning maintained at the air-surface interface. Airborne concentrations of SVOCs with vapor pressures corresponding to C25 to C31 alkanes correlated with airborne particle mass concentration. For SVOCs with higher vapor pressures, which are expected to be predominantly gaseous, correlations with particle mass concentration were weak or nonexistent. During primary particle emission events, enhanced gas-phase emissions from condensed-phase reservoirs partitioned to airborne particles, contributing substantially to organic particulate matter. An emission event related to oven-usage was inferred to deposit siloxanes in condensed-phase reservoirs throughout the house, leading to the possibility of reemission during subsequent periods with high particle loading

Risk Management of Daily Tourist Tax Revenues for the Maldives

International tourism is the principal economic activity for Small Island Tourism Economies (SITEs). There is a strongly predictable component of international tourism, specifically the government revenue received from taxes on international tourists, but it is difficult to predict the number of international tourist arrivals which, in turn, determines the magnitude of tax revenue receipts. A framework is presented for risk management of daily tourist tax revenues for the Maldives, which is a unique SITE because it relies entirely on tourism for its economic and social development. As these receipts from international tourism are significant financial assets to the economies of SITEs, the time-varying volatility of international tourist arrivals and their growth rate is analogous to the volatility (or dynamic risk) in financial returns. In this paper, the volatility in the levels and growth rates of daily international tourist arrivals is investigated.Small Island Tourism Economies (SITEs), International tourist arrivals, Tourism tax, Volatility, Risk, Value-at-Risk (VaR), Sustainable Tourism-@-Risk (ST@R)

Green Accounting, Air Pollution and Health

Human capital is an important component of economic growth. The article extends a theoretical model for comprehensive national accounting to the welfare effects of pollution on human capital. The model includes a production externality in the form of a flow of air pollutants that cause both direct disutility and indirect welfare effects by negatively affecting the productivity of labor. We show that defensive medical expenditures or healthcare costs allocated to mitigating the disutility of air pollution should not be deducted from conventional net national product (NNP), whereas the value of the percieved disutility of illness episodes caused by pollution should be subtracted from NNP. We derive a marginal cost-benefit rule for an optimal level of pollution given its negative health effects. The rule can be used for determining an optimal tax on harmful emissions. Finally, we outline a scheme for empirical comprehensive accounting and for estimation of an emissions tax.