Against High Interest Rates

In the economics of climate change, the future benefits of greenhouse gas emissions abatement are commonly discounted at a rate equal to the long-run return on corporate stocks, which averaged 6% per year during the 20th century. Since a 6% discount rate implies that one dollar of benefits obtained one century from the present attains a present value of less than one cent, this method implies that only modest steps towards greenhouse gas emissions are economically warranted. This chapter critiques this approach to discounting the future based on three distinct lines of reasoning. First, the use of high discount rates is inconsistent with classical utilitarianism, which holds that equal weight should be attached to the welfare of present and future generations. Second, the approach violates the principle of stewardship, which holds that it is morally unjust for present generations to engage in actions that impose uncompensated environmental costs on posterity. Third, the use of a 6% discount rate is appropriate in the analysis of public policies that have risk characteristics that are similar to those associated with corporate stocks. Economic theory, however, suggests that discount rates of 1% or less should be used to evaluate policies that reduce future risks. Since a main objective of climate change policies is to reduce the risks faced by future society, the use of high discount rates in the analysis of climate change policies is arguably inappropriate.

The Price of Snow: Albedo Valuation and a Case Study for Forest Management

Several climate frameworks have included the role of carbon storage in natural landscapes as a potential mechanism for climate change mitigation. This has resulted in an incentive to grow and maintain intact long-lived forest ecosystems. However, recent research has suggested that the influence of albedo-related radiative forcing can impart equal and in some cases greater magnitudes of climate mitigation compared to carbon storage in forests where snowfall is common and biomass is slow-growing. While several methodologies exist for relating albedo-associated radiative forcing to carbon storage for the analysis of the tradeoffs of these ecosystem services, they are varied, and they have yet to be contrasted in a case study with implications for future forest management. Here we utilize four methodologies for calculating a shadow price for albedo radiative forcing and apply the resulting eight prices to an ecological and economic forest model to examine the effects on optimal rotation periods on two different forest stands in the White Mountain National Forest in New Hampshire, USA. These pricing methodologies produce distinctly different shadow prices of albedo, varying from a high of 9.36 × 10−4 and a low of 1.75 × 10−5 $w−1yr−1 in the initial year, to a high of 0.019 and a low of 3.55 × 10−4$w−1yr−1 in year 200 of the simulation. When implemented in the forest model, optimal rotation periods also varied considerably, from a low of 2 to a high of 107 years for a spruce-fir stand and from 35 to 80 years for a maple-beech-birch stand. Our results suggest that the choice of climate metrics and pricing methodologies for use with forest albedo alter albedo prices considerably, may substantially adjust optimal rotation period length, and therefore may have consequences with respect to forest land cover change

Influential publications in ecological economics revisited

We revisit the analysis of Costanza et al. (2004, Ecological Economics) of influential publications in ecological economics to discover what has changed a decade on. We examine which sources have been influential on the field of ecological economics in the past decade, which articles in the journal Ecological Economics have had the most influence on the field and on the rest of science, and on which areas of science the journal is having the most in- fluence.We find that the field has matured over this period, with articles published in the journal having a greater influence than before, an increase in citation links to environmental studies journals, a reduction in citation links to mainstream economics journals, and possibly a shift in themes to a more applied and empirical direction.Copyright Information: © 2016 Elsevier B.V. http://www.sherpa.ac.uk/romeo/issn/0921-8009/..."Authors pre-print on any website, including arXiv and RePEC" from SHERPA/RoMEO site (as at 3/02/16)

A novel deliberative multicriteria evaluation approach to ecosystem service valuation

Although efforts to address ecosystem services in decision making have advanced considerably in recent years, there remain challenges related to valuation. In particular, conventional economic approaches have been criticized for their inability to capture the collective nature of ecosystem services, for their emphasis on monetary metrics, and the difficulty of assessing the value of ecosystem services to future generations. We present a deliberative multicriteria evaluation (DMCE) method that combines the advantages of multicriteria decision analysis with a deliberation process that allows citizens and scientists to exchange knowledge and evaluate ecosystem services in a social context. Compared with previous applications we add the following: (i) a choice task that can be expected to lead to a more reliable assessment of trade-offs among ecosystem services, and (ii) an explicit consideration of the future by both presenting specific socioeconomic scenarios and asking participating citizens to serve as “trustees” for future generations. We implemented our DMCE framework with 11 panels of residents of the upper Merrimack River watershed in New Hampshire with the goal of assessing the relative value of 10 different ecosystem services in the form of trade-off weights. We found that after group deliberation and expert scientific input, all groups except one were able to reach internal consensus on the relative value of these ecosystem services. Additionally, the pattern of trade-off weights across groups was reasonably similar; there was no statistically significant effect of the specific future scenarios that were presented to the groups. Results of a survey given to participants after the deliberative process revealed that most felt that their opinion during the deliberation was heard by the others and that they were influential on the outcome. Further, the vast majority were satisfied with the outcome of the deliberation. We conclude by discussing the strengths and limitations of our framework at an operational level

Limitations of integrated assessment models of climate change

The integrated assessment models (IAMs) that economists use to analyze the expected costs and benefits of climate policies frequently suggest that the “optimal” policy is to go slowly and to do relatively little in the near term to reduce greenhouse gas emissions. We trace this finding to the contestable assumptions and limitations of IAMs. For example, they typically discount future impacts from climate change at relatively high rates. This practice may be appropriate for short-term financial decisions but its extension to intergenerational environmental issues rests on several empirically and philosophically controversial hypotheses. IAMs also assign monetary values to the benefits of climate mitigation on the basis of incomplete information and sometimes speculative judgments concerning the monetary worth of human lives and ecosystems, while downplaying scientific uncertainty about the extent of expected damages. In addition, IAMs may exaggerate mitigation costs by failing to reflect the socially determined, path-dependent nature of technical change and ignoring the potential savings from reduced energy utilization and other opportunities for innovation. A better approach to climate policy, drawing on recent research on the economics of uncertainty, would reframe the problem as buying insurance against catastrophic, low-probability events. Policy decisions should be based on a judgment concerning the maximum tolerable increase in temperature and/or carbon dioxide levels given the state of scientific understanding. The appropriate role for economists would then be to determine the least-cost global strategy to achieve that target. While this remains a demanding and complex problem, it is far more tractable and epistemically defensible than the cost-benefit comparisons attempted by most IAMs

An Optical/Near-Infrared Study of Radio-Loud Quasar Environments II. Imaging Results

We use optical and near-IR imaging to examine the properties of the significant excess population of K>=19 galaxies found in the fields of 31 z=1-2 radio-loud quasars by Hall, Green & Cohen (1998). The excess occurs on two spatial scales: a component at <40'' from the quasars significant compared to the galaxy surface density at >40'' in the same fields, and a component roughly uniform to ~100'' significant compared to the galaxy surface density seen in random-field surveys in the literature. The r-K color distributions of the excess galaxy populations are indistinguishable and are significantly redder than the color distribution of the field population. The excess galaxies are consistent with being predominantly early-type galaxies at the quasar redshifts, and there is no evidence that they are associated with intervening MgII absorption systems. The average excess within 0.5 Mpc (~65'') of the quasars corresponds to Abell richness class ~0 compared to the galaxy surface density at >0.5 Mpc from the quasars, and to Abell richness class ~1.5 compared to that from the literature. We discuss the spectral energy distributions (SEDs) of galaxies in fields with data in several passbands. Most candidate quasar-associated galaxies are consistent with being 2-3 Gyr old early-types at the quasar redshifts of z~1.5. However, some objects have SEDs consistent with being 4-5 Gyr old at z~1.5, and a number of others are consistent with ~2 Gyr old but dust-reddened galaxies at the quasar redshifts. These potentially different galaxy types suggest there may be considerable dispersion in the properties of early-type cluster galaxies at z~1.5. There is also a population of galaxies whose SEDs are best modelled by background galaxies at z>2.5.Comment: Accepted to ApJ; 54 pages including 30 figures; 2 color GIF files available separately; also available from http://www.astro.utoronto.ca/~hall/thesis.htm