1. De VN vieren een feestje. Het is 20 jaar geleden dat de wereld bijeenkwam in Rio, internationale afspraken gemaakt werden, en nieuwe organisaties opgezet. Tijd voor een nieuwe wereldtop in Rio. Dit keer gaat het over Groene Groei, een plan om de meeste mensen een beetje armer te maken (en een enkeling veel rijker).

    Feestjes worden meestal gegeven als er iets te vieren is. De Wereldtop over Milieu en Ontwikkeling in 1992 heeft weinig opgeleverd. Het Groene Kruis werd daar opgericht, en de internationale verdragen over biodiversiteit, ontbossing en verwoestijning onderhandeld. Voetnoten in de geschiedenis van de falende milieudiplomatie. De internationale klimaatonderhandelingen komen ook voort uit Rio 1992, maar die zijn ondertussen verworden tot een bureaucratisch vliegwiel zonder effect op de uitstoot van broeikasgassen.

    Rio 1992 was het jubileum van Stockholm 1972, de internationale conferentie waar milieubeleid respectabel werd. Bodem, lucht en water zijn nu een stuk schoner dan in 1972, althans in Europe, Japan and Noord Amerika. Het milieubeleid heeft echter veel aan kracht ingeboet nu de aandacht verschoven is van gif in de speeltuin naar soortenrijkdom.

    Het hoofdthema van Wereldtop over Duurzame Ontwikkeling in Rio in 2012 is de Groene Groei. Dit is begrijpelijk. De wereldeconomie zwalkt van crisis naar crisis. De milieubeweging kan alleen op de politieke agenda blijven als het economische groei en werkgelegenheid belooft.

    Die beloftes zijn loos. Begrippen als “duurzame ontwikkeling” en “groene groei” lijken breed maar in praktijk is het klimaatbeleid onder een andere naam. De lokale milieuproblemen in Azië, Zuid America en Afrika doen er niet toe in de ogen van de mondiale milieuelite. Het milieubesef in de rijke landen komt juist voort uit de lokaliteit. Niemand in Europa wil terug naar de tijd van de dode rivieren. Maar mensen in Azië wordt gevraagd de verstikkende lucht te negeren en de aandacht te richten op een abstract probleem in de toekomst.

    Klimaatbeleid draagt niet bij aan de economische groei of de werkgelegenheid. Integendeel.
    Ongeveer 2% van het Bruto Europese Product wordt besteed aan energie. Als de energiesector met 10% groeit, dan groeit de economie met 0.2%. Een kleine sector kan de economische groei niet aanzwengelen. Dat geld in sterkere mate voor de werkgelegenheid. Ongeveer 1% werkt in de energiesector. Als het aantal energiewerkers verdubbelt, dan daalt de werkloosheid licht.

    De vraag naar energie is min of meer verzadigd, althans in Europe. We reizen zoveel als we tijd hebben, en onze huizen zijn warm genoeg. Groei van de energiesector komt niet voort uit groei in de hoeveelheid energie, maar uit een prijsstijging. Hogere energieprijzen worden vaak gevolgd door recessies. De economie groeit sneller als energie goedkoop is.

    Een vergroening van het energiegebruik is een omwenteling binnen de energiesector. Het gaat om het slimmer gebruiken van energie, en om andere energiebronnen. Dat betekent dat we meer investeren om minder of andere energie te gebruiken, een vreemd voornemen voor een Europa dat verdrinkt in de schuld.

    Beleidsmakers zeggen graag dat energie de groeisectoren van de toekomst zijn. Het voorbeeld van Denemarken wordt vaak aangehaald. Denemarken heeft een hoop geld verdiend met het verkopen van windturbines en de expertise om windturbines te maken. Veel Denen leven van de wind.
    Of misschien toch niet. De Deense windindustrie begon snel te groeien toen eerst Duitsland en daarna de rest van Europa subsidies begon te geven. Denen leven niet van de wind, maar van de gulheid van buitenlandse beleidsmakers.

    Het zou natuurlijk mooi zijn als we de Duitse regering zo ver krijgen om geld over te maken naar het bedrijfsleven in Nederland. Het is echter een riskante strategie. Bijna elk land zet in op energie. De meeste landen zullen deze gok verliezen.

    De zorg voor het milieu is breder dan klimaat alleen. Het oplossen van andere milieuproblemen helpt de economie op termijn – gezondere mensen zijn productiever – maar niet nu. De luchtverontreiniging in de opkomende landen vraagt om filters voor de uitlaatgassen van voertuigen en fabrieken. De armste landen hebben betere fornuizen nodig. Waterschaarste vereist betere bewateringsmethoden, ontbossing intensiever gebruik van landbouwgrond. Stuk voor stuk investeringen die de economie eerst een beetje afremmen maar zeer de moeite waard zijn. Zelfs de afvalscheiding, een tak van de milieubescherming die zeer veel mensen (laag betaald en gevaarlijk) werk verschaft, wordt meer en meer gemechaniseerd.

    Het is geen nieuw idee om de economische groei te stimuleren door een bepaalde industrie te ondersteunen. Groene energie is de laatste in een reeks die begon met Frans glas onder Lodewijk XIV. De geschiedenis toont dat de beschermde industrie zelden leert om op eigen benen te staan, maar er wel in slaagt om meer subsidies los te krijgen.

    Groene Groei is een poging van de milieubeweging om relevant te blijven in een tijd van economische crises. Beleidsmakers kunnen hun favouriten helpen, en subsidiejunkies krijgen een nieuw shot. Ik hoop dat Rio 2012 net zo’n succes wordt als Rio 1992.

    Een aangepaste versie verscheen in het NRC van 20 Juni 2012
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  2. The media storm

    The ESRI is both a think tank and a research institute. Reports that are deemed relevant to the public debate are released to the press and public. Academic work, including early versions in the form of working papers, are put on the web and announced through dedicated lists such as IDEAS/RePEc.

    That is the theory. In practice, there is one journalist who keeps track of the ESRI’s academic output and she occasionally writes a piece — small articles somewhere deep in the Sunday Times. She faithfully represents both the research and its early stage.

    These pieces are widely ignored. Last Sunday’s, however, was picked by a journalist of the Independent. He tried to talk to me, but I was on holiday. So, a derivative piece was written. The working paper that was a proof of concept became a research report with a policy conclusion.

    The ESRI should have explained that the paper was a working paper, trying to establish a method to answer an important question rather than answering the question.

    Instead, the ESRI withdrew the paper because of “methodological flaws” (that remain hidden from me) and claimed that the paper was revised (which it is not). The paper is being revised, but the previous version stands until it is replaced, which will not happen before I fully understand the additional results.

    Journalists then started asking questions about relationships and political pressure.

    The background

    Why am I involved in this in the first place? My research combines strategy with opportunism. The strategic part of the research is about projecting future emissions and resource use, and predicting the impact of energy and environmental policy. For instance, we wanted to know the effect of the carbon tax across the income distribution, but found that there was no baseline for either indirect taxes and income distribution or price inflation and income distribution. The latter paper never got published, because referees objected (rightly) to our focus on price changes while ignoring income changes, at a time when large portions of the population experienced downward social mobility.

    So, strategically, we needed a model that would tell us what happens to your consumption pattern (and hence your pressure on the environment) when you lose your job. Opportunistically, the first application of this model was to the pecuniary incentives to work.

    Previous research on incentives to work only compared benefits to earnings. (This is not trivial because both benefits and taxes are fiendishly complicated.) Outside of Ireland, there is some research on childcare and work incentives, but none on other costs of working. This is wrong. Working is expensive: Besides childcare, there are commuting, convenience food, cleaning services, representative clothing, and grooming (for those outside academia). The costs of working are substantial, and can affect the pecuniary returns to employment.

    So, our purpose was to write a paper for the international literature in economics.

    There are no immediate policy implications. You might be content with the pecuniary rewards to working as they are. You might argue for lower benefits, for lower taxes for the low paid, for X-taxes, for subsidized child care, or for a shake up of the markets that keep the prices of food, energy and transport so high.

    The research

    The working paper is here. There are two steps to the research.

    First, we need to estimate how being unemployed affects the pattern of consumption. The Household Budget Survey (HBS) has the best data on that for Ireland. The new HBS will be there any day now, so we used the previous one from 2005. This is unfortunate for a policy study, but fine for an academic proof of concept.

    So, you want to estimate a model that gives expenditure on a group of goods and services as a function of all those things that might explain such expenditure as well as unemployment.

    There are some things that you need to consider, such as whether to include pensioners. There are methodological issues with censoring of data, infrequent purchase, and selection. You need to think about the functional form: Is being employed a fixed cost, or is it a cost that varies with, say, income?

    The paper has all the decisions that we made. You can quibble with each of them.

    The HBS has one major problem for this application: The number of children living with their parent(s) is known, but not their age. There is a step function at 4: Child-care is very expensive for young children, and fairly cheap for older children. The results for the cost of childcare are thus an average of those with younger and older kids. In Dublin, childcare is about 1000 euro per child per month. Three kids in quick succession, with both parents working, would come to a peak childcare expenditure of 36,000 euro per year. (Oddly, university fees attract more discussion.)

    Michael Collins published a paper on the cost of working (after we did, as far as I know) based on data that are much richer but less representative.

    In the second part of the research, you need to compare the cost of working to the income difference due to working. For this, we used the Statistics on Income and Living Standards (SILC) data, which is the Irish and European standard. The data are the actuals, so we fitted a model to estimate the counterfactuals (what would your income have been, had you been unemployed) and the difference.

    Again, we can quibble about the model specification.

    We could have used the income data in the HBS, as that would avoid the complications of comparing data from one representative sample of the Irish population to data from another representative sample. Because there are grumblings about the quality of the income data in the HBS, we did not. Perhaps, for a proof of concept paper, we should have.
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  3. CLIMATE DAMAGES IN THE FUND MODEL: A COMMENT

    David Anthoff and Richard S.J. Tol


    Abstract
    Ackerman and Munitz (2012, Ecological Economics, 77, 219-224) claim that there is a risk of division by zero in FUND, an integrated assessment model of climate change. Their tests do not support this conclusion. They omitted the results of conclusive tests that show the opposite.

    Key words
    social cost of carbon, climate change, integrated assessment modeling


    In a recent paper published in this journal (Ackerman and Munitz 2012), Ackerman and Munitz (AM) present a sectoral decomposition of the impacts of climate change as represented in FUND, an integrated assessment model, and contrast the results with and without uncertainty. We welcome outside scrutiny of our work, even if in this case it adds little to what we knew already (Anthoff et al. 2011;Anthoff and Tol 2011). AM also take issue with the range of uncertainty about the impacts of climate change reported in the peer-reviewed literature, an issue that is outside our control.

    AM further claim that the equation describing the impacts of climate change on agriculture comes “dangerously close” to dividing by zero and that “the FUND estimate of the [social cost of carbon] is significantly affected” by these runs. This claim is incorrect, based on inconclusive diagnostic tests used by AM.

    AM report two tests for dividing-by-zero. In both tests, AM change the statistical properties of the Monte Carlo analysis and compare the expectation of the social cost of carbon from their modified version of FUND with estimates from the original model. In the original model, there are 16 composite distributions that are Normal*Normal/Normal, and 16 that are Normal/Normal. In one test, AM replace these probability density functions with Normal distributions. In the other test, they replace 16 probability density functions with Normal distributions, and 16 others with Normal*Normal distributions. Although they preserve the modes of the distributions (in the first test only), AM change the means, all higher moments and all cross-moments.

    For both tests, AM find a difference between their estimate of the social cost of carbon and ours. This is exactly as expected: Different parameters and different distributions lead to different results. The two “tests” of AM are therefore inconclusive. By no means is this an indication of any problem with either the original or, indeed, the modified model.

    There are appropriate tests for dividing by zero. Our standard diagnostic test compares the mean social cost of carbon to the trimmed mean, leaving out the smallest and largest realizations. A singularity in the code, such as a division by near-zero, would lead to a few very large or very small realizations and a substantial difference between mean and trimmed mean. In a diagnostic test implemented in response to the alleged problem, we trim the realizations that are closest to the suspected division-by-zero. Because FUND’s code is large and complex, with multiple programmers and frequent changes, we run these and other diagnostic tests for each and every new analysis. Needless to say, we do not release results if our tests reveal that something is wrong.

    We have been in repeated contact with AM on this matter. We helped with configuring the code to run on their machines. Mr Ackerman then contacted us because he thought he had found a division-by-zero error. We explained why his tests are inconclusive; AM’s “not an appropriate way” (p. 222) echoes this. Well before the AM paper was submitted, we shared the results of our standard diagnostic test and the one specifically tailored to the alleged problem. Neither test reveals a problem.

    We are surprised that AM nevertheless chose to publish their division-by-zero claim, while remaining silent on the results of these diagnostic tests.

     
    References
    Ackerman, F. and C.Munitz (2012), 'Climate damages in the FUND model: A disaggregated analysis', Ecological Economics, 77, (0), pp. 219-224.
    Anthoff, D., S.K.Rose, R.S.J.Tol, and S.Waldhoff (2011), Regional and sectoral estimates of the social cost of carbon: An application of FUND, Working Paper 375 ,Economic and Social Research Institute, Dublin.
    Anthoff, D. and R.S.J.Tol (2011), The uncertainty about the social cost of carbon: A decomposition analysis using FUND, Working Paper 404 ,Economic and Social Research Institute, Dublin.

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  4. Climate damage in the FUND model: A comment

    Richard S.J. Tol


    Abstract
    Ackerman and Munitz (2012, Ecological Economics, 77, 219-224) claim that there is a risk of division by zero in FUND, an integrated assessment model of climate change. Their tests do not support this conclusion. They omitted the results of conclusive tests that show the opposite.

    Key words
    social cost of carbon, climate change, research fraud


    In a recent paper published in this journal (Ackerman and Munitz 2012), Ackerman and Munitz (AM) present a sectoral decomposition of the impacts of climate change as represented in FUND, an integrated assessment model, and contrast the results with and without uncertainty. They also take issue with the range of uncertainty about the impacts of climate change reported in the peer-reviewed literature. I welcome outside scrutiny of our work, even if in this case it adds little to what we knew already (Anthoff et al. 2011;Anthoff and Tol 2011).

    AM also claim that the equation describing the impacts of climate change on agriculture comes “dangerously close” to dividing by zero and that “the FUND estimate of the [social cost of carbon] is significantly affected” by these runs. This is an incorrect conclusion, based on inconclusive diagnostic tests employed by AM.

    AM report two tests for dividing-by-zero. In both tests, AM change the statistical properties of the Monte Carlo analysis and compare the expectation of the social cost of carbon from their modified version of FUND with estimates from the original model. In one test, they replace 32 probability density functions with their respective modes. In the other test, they replace 16 probability density functions with their modes. In 16 other cases, they replace ratios of two normal distributions with single normal distributions. Although they preserve the modes, they change the means and all higher moments.

    For both tests, AM find a difference between their estimate of the social cost of carbon and ours. This is exactly as expected: Different parameters and distributions lead to different results. The two “tests” of AM are therefore inconclusive. By no means is this an indication of any problem with either the original or the modified model.

    There are appropriate tests for dividing by zero. Our standard diagnostic test compares the mean social cost of carbon to the trimmed mean, leaving out the smallest and largest realizations. A singularity in the code, such as a division by near-zero, would lead to a few very large or very small realizations and a substantial difference between mean and trimmed mean. In a diagnostic test specific to the alleged problem, we trim the realizations that are closest to the suspected division-by-zero. Because FUND’s code is large and complex, with multiple programmers and frequent changes, we run these and other diagnostic tests on a daily basis. Needless to say, we do not release results if our tests reveal that something is wrong.

    My colleague, Dr David Anthoff, and I have been in repeated contact with AM on this matter. David helped with configuring the code to run on their machines. Mr Ackerman then contacted us because he thought he had found a division-by-zero error. We explained why his tests are inconclusive; AM’s “not an appropriate way” (p. 222) echoes this. We shared the results of our standard diagnostic test and the one specifically tailored to the alleged problem. Neither test reveals a problem.

    I am surprised that AM nevertheless chose to publish their division-by-zero claim, while remaining silent on the results of these diagnostic tests. I can only speculate about their reasons, but there are some clues. In a newspaper interview (Wannerskog 2012), Mr Ackerman’s boss, Johan Rockström, who took an active interest in this matter, admits to not liking the political implications of our results. Mr Ackerman too openly admits[1] that the AM paper was motivated by his “belief” that FUND’s estimates of the social cost of carbon are too low and should not have been used by the US government (EPA and NHTSA 2009).

    In 2007, Mr Ackerman, who regularly works for and with environmental activists[2], had also contacted me because he was unable to reproduce a result. Upon inspection, he had overlooked an equation. Mr Ackerman was informed of his omission. Nonetheless, in 2008, Ecological Economics published a paper (Ackerman and Stanton 2008) that falsely claims that this result cannot be reproduced (Bosello et al. 2008).

    I am surprised that Ecological Economics has chosen to publish a paper with partly meagre, partly wrong results. Mr Ackerman has previously published with one of the editors (Ackerman et al. 2009), but that of course is not a reason. AM’s literature review is incomplete in that it does not refer to the work of anybody who has prior experience in working with FUND. Perhaps the editor was unable to identify experts to review the paper, although I have reviewed a fair number of papers for Ecological Economics.

    Acknowledgements
    I am grateful to David Anthoff for constructive comments. All opinions are mine. I am grateful too to David Stern for his excellent work as an associate editor.

    References
    Ackerman, F., S.J.Decanio, R.B.Howarth, and K.A.Sheeran (2009), 'Limitations of Integrated Assessment Models of Climate Change', Climatic Change, 95, pp. 297-315.
    Ackerman, F. and C.Munitz (2012), 'Climate damages in the FUND model: A disaggregated analysis', Ecological Economics, 77, (0), pp. 219-224.
    Ackerman, F. and E.A.Stanton (2008), 'A comment on "Economy-wide estimates of the implications of climate change: Human health"', Ecological Economics, 66, (1), pp. 8-13.
    Anthoff, D., S.K.Rose, R.S.J.Tol, and S.Waldhoff (2011), Regional and sectoral estimates of the social cost of carbon: An application of FUND, Working Paper 375 ,Economic and Social Research Institute, Dublin.
    Anthoff, D. and R.S.J.Tol (2011), The uncertainty about the social cost of carbon: A decomposition analysis using FUND, Working Paper 404 ,Economic and Social Research Institute, Dublin.
    Bosello, F., R.Roson, and R.S.J.Tol (2008), 'Economy-wide Estimates of the Implications of Climate Change -- A Rejoinder', Ecological Economics, 66, 14-15.
    EPA and NHTSA (2009), 'Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Efficiency Standards', Federal Register, 74, (187), 49454-49789.
    Wannerskog, K. (3-26-2012), 'Klimatforskare anklagar SU-professor för förvanskning', Gaudeamus.



    [1] http://realclimateeconomics.org/wp/archives/801
    [2] http://triplecrisis.com/for-whom-the-blog-tols/
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