The importance of the liberal arts

... the usual suspect scientific and technical conundrums which the techdysiasts would have us address are defined and constrained far more by their social and political dimensions than by the hard science issues at their core. Fixing climate change, poverty, or even global financial regulation is not merely a problem of finding the correct solution to a thorny technical problem. These big issues are big because they entail questions of philosophy, ideology, justice, the proper form of society, and even culture. The underlying science is almost trivial compared to the value questions at stake.

That's the Epicurean Dealmaker.

I am grateful for, among many other things, a broad formal education, as well as the unprecedented opportunity to continue learning through the blogosphere. Happy Thanksgiving.

Heat, yields and prices: PPT version

Michael Roberts just posted a great agriculture presentation on his blog - take 5 minutes to flip through it. Not only is it a good synthesis of some meaningful content, it's very easy to follow (and as a consultant, a.k.a. professional PowerPointeer, I have high standards for these things).

Crowd-sourcing carbon pathways to 2050

I haven't tried it myself, but the new 2050 pathway calculator looks like a neat tool to stimulate reasonable public debate about climate trade-offs in the UK. Reminiscent of Chevron's Energyville, you input your choices for energy sources and see what the outcomes look like in 2050.

Via David MacKay, who also synthesizes the preferred pathways of eight expert panelists.

It's now open to the public to join in. In a couple more days, the opening panel will wrap up their conversation; it'll be interesting if they can achieve consensus on one or two pathways.

A promising experiment, and easily replicable in the U.S...

Sidling away from climate debate

While results from Cancun seem to warrant cautious optimism, it seems fewer and fewer actors want to tackle climate head-on in the U.S.:

After two years of fairly disappointing outcomes at the U.N. climate summits in Copenhagen and Cancun, and after watching hopes for cap-and-trade or other measures to regulate carbon fizzle in the U.S. Congress, a growing slice of those favoring investment in clean-energy are working hard to ditch the association with "climate," which now seems to many a losing political issue. As the Breakthrough Institute's Ted Nordhaus put it, "We need to free energy from the polarizing climate debate."

This seems like an obvious step, in retrospect, and potentially a very positive and effective one. After all, climate is only one form of environmental pressure humankind is exerting upon the planet, and there are many other (inter-related) challenges to tackle (water, waste, agricultural sustainability, etc.). And hey, if it worked in Kansas...

What 2 degrees would look like

Despite the optimism of climate gurus like Robert Stavins and Trevor Houser with the results of Cancun, a temperature rise of 2 degrees is almost certain and adaptation is here to stay. That's why these two videos by CCAFS (a new CGIAR initiative focused on climate change, agriculture and food security) are interesting. They feel overly scripted and a bit contrived (hasn't the Sahara been shifting back and forth for centuries, even before it had any help from us?), but nevertheless provide some anecdotal illustrations of what agriculture looks like when temperature varies by two degrees. There is a lot of adaptation (e.g. growing trees to shade coffee plants) and also some shift to livestock cultivation as hotter temperatures make land more arid and marginal. Maybe the latter is another sign that we should all just go paleo...

New IFPRI modeling and report

IFPRI just published a new report entitled "Food Security, Farming and Climate Change to 2050: scenarios, results, policy options" with new outputs from their robust IMPACT partial equilibrium model. The punch line is:

Our analysis suggests that up to 2050, the challenges from climate change are “manageable,” in the sense that well-designed investments in land and water productivity enhancements might, conceivably, substantially offset the negative effects from climate change. But the challenges of dealing with the effects between 2050 and 2080 are likely to be much greater than those to 2050. Starting the process of slowing emissions growth today is critical to avoiding a calamitous post-2050 future.

The last sentence is a very important one. While attention (including my own) may be drifting toward adaptation, the fact that significant climate change will almost certainly occur is not a binary determination. It could be bad or very bad, depending on the level at which atmospheric greenhouse gases stabilize (or not), and thus in the long run mitigation still has an extremely important role to play. The challenge, of course, is that both the distraction of adaptation and the long time horizon make it very difficult to muster a critical mass of political will behind mitigation actions that impose any sort of economic pain whatsoever.

Adaptation to center stage

One of my favorite recent papers is by Michael Roberts and Wolfram Schlenker (regular readers may have noticed me regularly plugging it here, here, here, here, and here). Congrats to Michael and Wolfram on being mentioned prominently by The Economist in this week's long article on climate adaptation.

The entire article is pretty good and worth a read, particularly for its dogged effort to parse out climate impact and adaptation, and subsequent honesty where this proves impossible. For example:

Melissa Dell of the Massachusetts Institute of Technology and her colleagues argue that in developing countries GDP growth has been lower in hotter years than in cooler ones. This may carry over into longer-term increases in temperature. The mechanism is obscure: it may simply be that overheated people work less hard. That can be seen either as adaptation or as a worrying impact, slowing down the economic growth which is the surest foundation for other, more positive adaptations.

Not only is adaptation hard to distinguish from impact, investments in response are harder to classify:

Whereas investments in mitigation are fairly easy to understand—build windmills not coal-fired power stations, and so on—those in adaptation are harder to grasp. Action on climate bleeds into more general development measures.

The article overall is pessimistic

The fight to limit global warming to easily tolerated levels is thus over.

and while I wish I disagreed, and hold out for better-than-expected outcomes from Cancun this week, my inner skeptic and pragmatist are pushing me hard to shift focus - professional and personal - toward adaptation.

Another cut in crop forecasts

U.S. crop production forecasts were slashed again this week:

The agriculture department on Tuesday cut estimates of US corn yields for a third successive month, forecast record soyabean exports to China and warned of the slimmest cotton stocks since 1925.

“The combined production shortfalls and dramatic potential stock drawdowns mean a much tighter supply picture than just a few months ago,” the agency said in a separate grains report.

Benchmark Chicago corn futures soared above $6 a bushel for the first time since August 2008, before ending lower.

I'm looking breathlessly to Michael Roberts for the more granular data analysis he promised; this year could well be a preview of agriculture in a warmer world of the future.

In other unfortunate news, most of the $20 billion of food aid that was pledged last year has failed to materialize, and the probability of inspiring U.S. leadership on the issue has fallen substantially after the recent mid-term elections.

Highest climate ROI = family planning

Suppose you had $1 million to spend on tackling climate change. How would you spend it to get the best bang for your million bucks?

Would you spend it on stopping the slash-and-burn of forests? Perhaps on switching to nuclear energy? More energy-efficient buildings? Building cleaner power stations?

According to a recent paper by David Wheeler and Dan Hammer, climate change experts at the Center for Global Development, the answer is (drum roll): you would do much, much better to spend your money on a combination of family planning and girls’ education in developing countries.

That's Owen Barder, reporting on a Copenhagen Consensus-like analysis (in output, not methodology) on climate change mitigation. According to the analysis, the killer combo of family planning and girls' education is ~4x as cost effective as reducing deforestation, ~6x better than nuclear and almost 10x better than CCS.

An interesting thought explored in the comments is whether this would be more impactful in poor countries (high potential to reduce fertility but tiny per capita emissions) or rich countries (little unmet demand for family planning, but much larger carbon footprints). Apparently the two are similar (at least the U.S. is).

As Owen acknowledges, there are limitations to this approach, but at the very least this appears to be a solid analysis with a thought-provoking conclusion.

Sad news: SO2 is dead

Tim Haab reports from the Heartland that the teetering SO2 cap and trade market is "Elvis dead."

The story goes something like this: The SO2 market was designed as if SO2 was a uniformly mixed pollutant. This made trading easier. One ton of SO2 in Ohio could be traded for one ton in Illinois. But, the impacts of each of those tons is different. Those states who absorbed a disproportionate impact from SO2 trading sued the EPA. Congress issued the Clear Air Interstate Rules limiting interstate trades of SO2. SO2 prices crashed. EPA lost the lawsuit: Must scrap the SO2 market and start over. SO2 market dies quietly.

Leaving us without a textbook example of market-based environmental policy... and that is the least of it.

It's all about messaging

Speaking of farmers and climate change, Chris Clayton highlights has an interesting story from a climate-skeptical Kansas town that's nevertheless reduced its energy use by 5% from baseline (which is a lot).

You don't make a case to do something in Kansas by saying Al Gore backs it, but you can reshape the message and get the same result.

Climate and Energy Project looked at what it would take to get Kansans to overcome their skepticism about climate change.

So the (Climate and Energy) project ran an experiment to see if by focusing on thrift, patriotism, spiritual conviction and economic prosperity, it could rally residents of six Kansas towns to take meaningful steps to conserve energy and consider renewable fuels.

The most resonant themes were thrift (i.e. efficiency), reducing dependency on foreign oil, green jobs and "creation care":

The obligation of Christians to act as stewards of the world that God gave them, even creating a sermon bank with talking points they could download.

This is probably even much more effective than arguing that rising temperatures from climate change will hammer yields.

Heat and crop yields in 2010

This may be premature, but I'm very tempted to award a gold star for clairvoyance to Michael Roberts, whose research on the effect of heat on crop yields I've blogged here and here. Here he is on August 12:

[Current temperatures] are still rising fast. If this keeps up for a few more days I'd say yields will get hammered.

(to give credit where credit is due, the market may have seen the same thing)

Anyway, fast forward to last week, the October forecasts for wheat, corn and soy are all well below the September forecasts (although USDA puts a bizarrely positive spin on it). As Michael's chart below shows, the September forecast is almost always very good, and revisions are generally upward, not downward, so something funny happened this year, and late heat seems to be a very strong hypothesis.
Michael is investigating the more detailed data and I hope will post any findings as they arise. As I mentioned before, if it was the heat, it will be very valuable to prove and communicate this to stakeholders in agriculture, some of whom have taken very skeptical views toward climate change and its impact on them specifically.

Do food prices cause "food riots"?

The usually outstanding Chris Blattman has posted some spotty analysis of the recent journalistic coverage of food riots in Mozambique, which he finds "shallow and alarmist." I would have commented, but many have already done so, so rather than pile on I'll just articulate my own take here. Like commenter @Jonomist, I think his punchline that we should be more careful attributing causality is probably defensible, but some of his arguments are not.

Here’s what a closer look at your economics and political science can tell you.

Expect price volatility to fall over time. Globalization and growth should reduce price spikes in future. More countries are producing crops. Climate shocks in Argentina are not that tied to climate shocks in Russia or China, and so price volatility from supply shocks should be going down. Falling transport costs also mean that more substitutes are available, further reducing price volatility. So things should be getting better over time, not worse, especially if trade allows countries to diversify their diet. Envision a future of diminishing instability.

This is a dangerously superficial argument, reminiscent of arguments that a more integrated global financial system would mitigate systemic risk - remember how that turned out? It's what a textbook analysis would say, but lacks grounding in the realities of these markets.

• Empirical data (most recently the price spikes of 2008 and now 2010) don't bear this out, at least in retrospect to date.


• Many agricultural stakeholders - including private companies both producing and buying food, as well as multi-laterals such as the FAO and the World Bank - are deeply concerned with price volatility in the future. (My own view is that we can't yet tell if average volatility will increase to a higher permanent plateau, but most players believe this is much more likely than the opposite.)


• Growth in both population and income is driving strong growth in agricultural demand that is unlikely to abate soon, and pushing the world toward the edge of its current supply capacity. Production can grow too (Ehrlich and Malthus were wrong) through increasing yields through research and bringing more land under cultivation, but the former is longer-term and the latter runs into seriously diminishing marginal returns. My personal belief is that we will be able to feed 9 billion people a more modern diet by 2050, but there will be bumps along the way, and any time demand nears supply capacity, the potential for price volatility increases significantly.


• Climate may become more unstable as climate change progresses, and climate change could also adversely affect baseline agricultural productivity, as Michael Roberts' excellent paper has shown and the market seems to believe.


• As several commenters noted, national policies play a substantial role in agricultural prices (notice how the wheat market responded to the Russian wheat export ban), and this intervention seems unlikely to diminish (especially in light of the above factors) - if anything it is likely to exacerbate any increases in underlying volatility caused by long-term demand growth and short-term supply shocks.

A few smaller nits:

Look to local policy, not global markets, for the real instability. Bread prices climbed 30% in Maputo, apparently due to Russian wildfires. But global wheat prices have only risen 5%. Why the disproportionate effect? I wish I knew, except I haven’t a single report from the ground that points out the disparity, let alone one that searches for an answer.

Yes, global wheat prices have risen 5% "during August" - and more than 50% since June, as commenter Bernhard Brummer points out. Some of the blame goes to the NYT writer for not picking a better baseline, but it's not a hard thing to double-check.

Chris: For riots, look to poor policing, not poverty.
@Jonomist: Are fires caused by insufficient fire marshaling?

Exactly.

Chris' track record is too strong for him to need to redeem himself, but he does so anyway (I'm not sure if intentionally) through his next post on the quality of his commenters (who came through rapidly here).

Pakistan floods and world weather patterns

Via MR, striking pictures of the flooding in Pakistan, which may have affected more than 20 million people and was apparently caused by the same weather patterns responsible for this summer's heat wave in Russia (and the next global food crisis?).

Remember that the Punjab is also a major wheat breadbasket, although it does not appear to be among the majorly affected regions.

Is it climate change's fault? Hard to say, honestly, since pinning any single weather pattern on climate change is impossible, although as the Economist article cited above says, it fits the pattern of increased extreme events we would expect with global warming.

Update: Apparently one fifth(!) of the country is underwater. You could infer this from the above picture but it hadn't occurred to me that it could be interpreted so directly.

Sea rise not that scary?

That's the case that climate adaptationist Bjorn Lomborg (don't call him a skeptic) makes at Project Syndicate, because we've dealt with it already:

Imagine that over the next 70 or 80 years, a giant port city – say, Tokyo – found itself engulfed by sea levels rising as much as 15 feet or more... Without a vast, highly coordinated global effort, how could we possibly cope with sea-level rises on that order of magnitude?

Well, we already have. In fact, we’re doing it right now. Since 1930, excessive groundwater withdrawal has caused Tokyo to subside by as much as 15 feet, with some of the lowest parts of the downtown area dropping almost a foot per year in some years. Similar subsidence has occurred over the past century in a wide range of cities, including Tianjin, Shanghai, Osaka, Bangkok, and Jakarta. In each case, the city has managed to protect itself from such large sea-level rises and thrive.

Lomborg cites research research claiming that over 95% of the world's coastal population is urban, making rising oceans no big deal.

A 20-foot rise in sea levels (which, not incidentally, is about ten times more than the United Nations climate panel’s worst-case expectations) would inundate about 16,000 square miles of coastline, where more than 400 million people currently live... [and] the vast majority of those 400 million people reside within cities, where they could be protected relatively easily, as in Tokyo.

Off the top of my head, I'd challenge this with Bangladesh, which has 160 million people and is very low-lying:

Is it really fair to assume Dhaka has an easy out just because it's "urban"? Maybe Jakarta has coped with rising seas, but Indonesia's per capita GDP is still 3x that of Bangladesh.

Lagos and Karachi are two other poor coastal megacities that would be worth doing the same analysis for.

Update: I just had dinner with someone from Bangladesh who confirmed that the idea that rising seas won't hit Bangladesh hard is preposterous. First, there are millions of people living in low-lying, non-urban areas (especially hundreds of islands in the Ganges Delta). Second, much of the productive agricultural land is similarly low and is already suffering from soaring salinity in many areas. So it seems that the underlying analysis is weak, and Lomborg himself should be doing better quality control of the sources he chooses to cite.

Update 2: A few relevant numbers to refine our back-of-the-envelope: 46% of Bangladeshis live within 10 meters of the average sea level, and the country is only 27% urban. So it seems very unlikely that Lomborg's math that "only ~15 million people would need to be relocated [over the course of the century]" can possibly be right.

Market believes heat hurts crop yields

The market believes what Michael Roberts' popular paper showed about crop yields - higher temperatures really hurt.

Corn futures rose the most in almost two weeks and soybeans gained on speculation that the recent Midwest heat wave will mean smaller production than the record crops predicted today by the government.

August has gotten off to the second-warmest start since 1960, T-Storm Weather LLC said today in a report. Another forecaster, Commodity Weather Group LLC, said about 25 percent of the U.S. soybean-growing area won’t get enough rain for proper plant development over the next two weeks, and that the dryness could harm a third of the Midwest should rain miss sections of Illinois this weekend, as expected.

“The crops are going downhill rapidly in parts of the Midwest and South,” said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis. “Our farmers are already preparing for corn yields that may fall 5 percent to as much as 10 percent from earlier field samples.”

Looking for the silver lining, might this influence the farm lobby's stance on climate change?

Via Michael at Greed, Green and Grains.


Update: I'm struggling a bit to square this with USDA predictions of record U.S. corn production... I wonder if those forecasts were based on outdated inputs (like, perhaps, "earlier field samples").

The fragile credibility of cap-and-trade markets

This isn't fresh news, but it's a powerful illustration of how sensitive cap-and-trade systems are to loss of political credibility. The SOx cap-and-trade market was a long-standing success story and talisman for those who sought to establish a similar, broader system for GHG emissions to curb climate change.

2005:

The current problems in the acid-rain market stem from 2005, when the EPA, with the backing of many utilities and environmental groups, announced major new reductions in smog-forming and soot-producing emissions, and expanded the reach of the cap-and-trade system in more than two dozen, mostly Eastern, states.

2008:

In response to lawsuits filed by a handful of utilities and North Carolina, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the EPA had overstepped its authority...

In response to the ruling, prices for the pollution allowances plunged to $130 a ton. Utilities held off on projects to clean up their plants.

2010:

Last week, the EPA issued new rules to comply with the court's decision. The new program will limit the use of the market and instead require most of the emission reductions to come from changes at the plants themselves. And millions of allowances that utilities now hold can't be used under the new program, which will issue its own allowances.

And unsurprisingly, prices have now fallen to essentially zero. A powerful cautionary tale.

Short-term disaster, long-term hope

The ugly stories and pictures of the Deepwater Horizon spill's impact on the Gulf Coast ecosystem and economy are rolling in. But while the short-term prospects look grim, reason for longer-term hope can be found in an analysis of Mexico's devastating Ixtoc oil spill (an anagram for "toxic," I noticed) of 1979.

Soto, who followed the fish and shrimp population off Mexico closely, found to his surprise that for most species the numbers had returned to normal within two years.

"In 1979, the islands around Veracruz looked like black doughnuts, there was so much oil clustered around them,'' he remembers. "It was 12 to 15 inches thick in some places. But as I came back over the years, it got harder and hard to find. After five to seven years, it was hard to see the outline, and by 2002, an unsuspecting person would have thought it was a rock ledge ... it was covered with algae and shells and just looked like a normal part of the environment."

Even under water, where the sun can't help the oil break down, nature subverts it, says Mexican marine biodiversity analyst Jorge Brenner. "If you visit the coral reefs in the Gulf of Campeche, the tar has been covered with sea grass, algae and sediment,'' he says. "You actually have to dig a little bit to find it, although it's definitely there."

The spill might also be, ironically, good news for environmentalists, although perhaps not across the board, as finite public attention and energy for environmental and sustainability issues is diverted from less acute (but still enormous) challenges like climate change.

Krugman on environmental economics

Long but excellent article by Paul Krugman on Environmental Economics 101 and the economics of climate change. I also recommend Michael Roberts' addendum and heartily second his emphasis on argiculture, forests and land use which Krugman under-addresses.

One thing I found interesting was Krugman's favorable take on both the legitimacy and the feasibility of carbon tariffs:

To the objection that such a policy would be protectionist, a violation of the principles of free trade, one reply is, So? Keeping world markets open is important, but avoiding planetary catastrophe is a lot more important. In any case, however, you can argue that carbon tariffs are well within the rules of normal trade relations. As long as the tariff imposed on the carbon content of imports is comparable to the cost of domestic carbon licenses, the effect is to charge your own consumers a price that reflects the carbon emitted in what they buy, no matter where it is produced. That should be legal under international-trading rules. In fact, even the World Trade Organization, which is charged with policing trade policies, has published a study suggesting that carbon tariffs would pass muster. [emphasis mine]

These aren't pushover arguments, but my gut reaction is that even if the WTO sanctions this type of action, the reaction from countries like China wouldn't be pretty.

Implications of agricultural elasticities

Michael Roberts summarizes one of his latest projects in three minutes (speaking time). For those not enamored of econometrics (e.g. why he uses weather as an instrument), his conclusion is:

Globally the demand elasticity for these crops combined is about 0.05 and the supply elasticity is about 0.10, perhaps a little larger. Both of these elasticities are far greater than they would be if estimated using traditional econometric methods that do not account for the joint-dependency of prices on supply and demand. If applied to US ethanol policy, they suggest US ethanol subsidies have caused about a 30% increase in prices for these key commodities and about a 35 million acre expansion of cropland worldwide. That's about the size of North Carolina, the state where I live.

A 30% price increase from biofuels alone is quite substantial. If I recall correctly, IFPRI estimated that biofuels accounted for 30% of the total recent rise in food prices (note the distinction from the absolute 30% implied by Michael's work). Other estimates varied widely, going up to 75% of the total rise in an unreleased but leaked World Bank report that caused quite a bit of controversy.

This also reminds me how inelastic demand makes farmers oppose climate change legislation.