Unleashing Big Money for a Green Economy

I just read the finance section of the Green Economy Report by the UNEP (UN Environment Programme), the Green Economy : Finance I am most interested in the section about new markets and instruments such as the carbon market, green bonds, and green property. The insurance industry is also an ideal vehicle for driving more environmentally sustainable decision-making.

To me, it is critical that assets controlled by the high net worth community, asset pools of insurance companies and pension systems, and the financial services and investment sectors get directed towards driving the transition to a green economy. I would like to do work or research on redirecting assets towards green industry and infrastructure, but I'm not sure where to start. I still need to figure out who works on this already.

Berkeley Energy Conference

The Berkeley 2011 Energy Symposium is coming up in October. Pretty exciting!

California Green Jobs Report

I read more about the California Workforce Education and Training Needs Assessment for Energy Efficiency, Distributed Generation, and Demand Response.

This is really a line of research I am interested in pursuing. Here are some things that stuck out to me.

They talked about the need for "high-road agreements," which I think means including higher standards in contracts for businesses. The report also stresses the importance of enforcing standards and having certifications for labor force training.

The study found that incorporating environmentally friendly practices and standards into traditional training programs was more important than brand new training programs for new specialized green jobs. That is, greening traditional trades is more effective than anticipating narrow specialized emerging occupations. Actually, this is exciting because this has been my attitude towards green jobs, although it was just based on a hunch. The report's conclusion is more about the technicalities of job creation and training, but the message I was trying to send when I did the Big Picture Panel Lecture was that students should try to work on sustainability within whatever field they chose, not feel like they needed to change careers to work on environmental sustainability. While I think it makes sense to try to get a Sustainability minor or certificate, it would not make sense to make a Sustainability major. At least, not for most people.

I also thought of two other ideas while reading this report. One is that maybe businesses that work on contracts should have online rating sites like Yelp, especially government contractors. Consumer product ratings are now ubiquitous, but taxpayers regularly pay companies that they don't know much about. On the other hand, it may be that this information is readily available, and people are just not that interested.

The other idea is that students in high school and also college should have more information available about possible career choices so they can make better decisions. It seems like to me that most people make career decisions based on their interests, which is good, but I think it would be better if there was at least a little bit of data or infographics. Otherwise, the bit of data that students use are from TV shows and celebrities. It is becoming clear that the middle class has benefited the last three decades from cheap goods in China, and so it has not been particularly difficult to maintain a pretty good standard of living in the United States even if you did not make savvy career choices. It simply has not been that competitive. I think that the labor market is going to get more and more competitive now in the United States, and that more data for students are in order, not just more SAT prep.

Shipping 3,000 Miles

Today I called Amtrak to find out more about Amtrak Express shipping service. Apparently, there is an Amtrak shipping booth at every Amtrak Station, where you can drop off packages, and it gets delivered to any other Amtrak Station by freight. It's pretty affordable.

For Boston South Station to Oakland California:

50lbs $52

100lbs $67
$.57 each lbs over 100

500lbs $295 max
delivery in 4-7 days

Train also emits the least CO2 at 0.055lbs CO2 per Ton-Mile. Plane is a whopping 3.366lbs CO2 per Ton-Mile, and car is about 0.654lbs CO2 per Ton-Mile.

I've been trying to do my own little calculations for transporting things in my particular car. The easiest way to approximate how much extra emissions it takes to transport an extra 100lbs is to compare the average fuel economies with and without the extra weight. With just me, my car can average 33mpg if I'm driving on the highway 80% of the time. With an extra 100lbs, which is just a bit less than another person, I estimate that my fuel economy gets down to 28mpg at most. It takes an extra 5.4 gallons to travel 1000 miles with the extra 100lbs. There is about 19.4lbs of CO2 per gallon of gas. It comes out to being about 1lb of CO2 per Ton-Mile. The cost in extra gas would be about $64 for $4/gallon gas, so about the same as Amtrak Express.

(An optimistic estimate would be 30mpg, which comes out to 3 gallons more, which is about .582lbs per Ton-Mile and $36.)

UCB Professor Lee Friedman

Professor Lee Friedman is another economist who works on environmental policy. He works on a broader range of topics, though, than Professor Hanemann, and his research tends to be more applied. He specializes in applied microeconomics and environmental markets. I am most interested in his work on pricing in the energy market and carbon market to reduce greenhouse gas emissions. He teaches a core GSPP class, the Economics of Public Policy Anaylsis.

UCB Professor Michael Hanemann

Professor Michael Hanemann is an economist who works on environmental policy. He is a professor in the Department of Agricultural and Resource Economics.

Dr. Hanemann’s research interests include non-market valuation, environmental economics and policy, water pricing and management, demand modeling for market research and policy design, the economics of irreversibility and adaptive management, and welfare economics.

He is an expert in the economics of water, the valuation and the demand of water. I would be more interested in applying his techniques to other material resources, though. On the one hand, according to standard environmental economics analysis, my drive to reduce the use of other material resources is to minimize the negative externality of pollution or climate change. However, I feel it is more than that. I suppose that fundamentally I feel that exponential increases in material resource use is a problem. I also think that improving supply chain is an insufficient solution. It only seeks to make resource use efficient, but there is no mechanism to ultimately constrain it. Even so, it's a necessary first step.

UCB Assistant Professor Margaret Taylor

Another faculty member who works on environmental policy and technology is Margaret Taylor. Her line of research has lately been about technology push and demand pull policies. She studies how policies can effectively achieve environmental goals through supporting technological innovation.

She works with the climate modeling community as well. It seems that climate and technology modeling becomes important to all environmental policy work.

I'm not sure what the defining differences are between her and Dan Kammen. It seems that they don't work together. I wonder if they have opposing perspectives or there is just no interest overlap.

UCB Professor Dan Kammen

Another professor who works on environmental policy is Dan Kammen. He is also a professor in the Energy and Resources Group, and he is the director of the Renewable and Appropriate Energy Laboratory, which seems to be pretty well funded. He actually has a background in physics.

Dr. Kammen's research interests include: the science, engineering, management, and dissemination of renewable energy systems; health and environmental impacts of energy generation and use; rural resource management, including issues of gender and ethnicity; international R&D policy, climate change; and energy forecasting and risk analysis.

I need to find out more about his research on engineering management. The dissemination of renewable energy systems is appealing because those policies and projects could be implemented immediately. However, part of me wants to work on projects that are more general in scope.

There is a project in RAEL on clean energy financing that is well-aligned with my interests. Maybe I could work with that group.

Professor Kammen teaches a GSPP class that has been highly recommended called Energy and Society.

Berkeley People

I've been doing some research on faculty at Berkeley I am interested in. When I get there I'll probably try to take some classes or seminars with them and see if they have any openings for research positions.

W. Michael Hanemann

Richard Norgaard

Daniel M. Kammen

Margaret Taylor

Lee S. Friedman

Environment and Labor Classes at UC Berkeley

I am starting to look at interesting classes I'm interested in at Berkeley.

The Governance of Global Production would be pretty interesting.

This graduate seminar explores critical policy and theoretical questions regarding the governance of global production. The seminar engages current trends in the restructuring of industrial production, distributions of environmental, labor, and social impacts from this production, and new strategies for democratic governance. The course presents existing theories of regulation and governance, assesses market and state “failures,” and critically analyzes emerging responses to the limits of traditional regulation. Using cases from the wood products, electronics, garments, shoes, coffee, food, chemicals, and oil industries, the seminar explores the potentials and limitations of new governance strategies, including: corporate voluntary self-regulation, codes of conduct, multi-stakeholder monitoring systems, certification and labeling schemes, fair trade programs, transparency and reporting initiatives, legal strategies, and international accords and agreements. The course seeks to evaluate why these new institutions and policies have emerged, how they function, and when and under what conditions they can be effective in mitigating environmental, labor, or social impacts of production

China's Environment in the News

Never good news, but at least they admit it.

China Faces ‘Very Grave’ Environmental Situation, Officials Say

Plan for China’s Water Crisis Spurs Concern

In order to feed the growing water needs of northern China, they are planning on diverting water from the ChangJiang River to the Yellow River. It is a very weighty decision that will have huge ecological and human impacts. People tend to forget that inaction and other alternatives also have huge ecological and human impacts. It is upsetting to read so much righteous comments from NYT readers when American per capita water use is so much more than China's. In fact, many American states, most notably California, face major water shortages. America's population is much lower, is much wealthier, and yet we still have problems and many do not even admit it. Many Americans still do not believe in climate change.

Bloomberg and Clinton

They are getting all environmental.

Trustmark for Boosting Wind Power

There was an interesting article in Fast Company about Vestas, which is promoting a trustmark, WindMade.

In order for consumers to account for the externalities of business such as environmental damage, more information is needed about products other than just quality and price. That is why certifications such as Energy Star, USDA Organic, and Fair Trade will be increasingly important for helping consumers make decisions about products and business models. How can this be implemented? Third party certification and reviews may become a bigger industry. On the other hand, this might be expensive for the consumer as well as small businesses. It would be an additional barrier to entry for a startup, which is not necessarily something we'd want. It would be desirable to achieve greater transparency without the extra cost.

Green China Rising - September 2011

Really interesting documentary. Maybe China will be the place to work on environmental policy because of the receptiveness of its politicians and citizens.

Their website at www.RedHotGreenChina.com

Penguins are Dying

Tragedy In Black and White
The north and south poles are affected by climate change first. Penguins and polar bears are among the species that will not be able to adjust quickly enough. And to some extent, yes, there is no human need for those animals. However, they represent what's to come for others including humans. Unfortunately, not all damage can be undone or at least will take time and a lot of effort.

Kind of depressing

Environmental Economics : Pricing

The role of technology is really important in policymaking and regulations. Natural resources are not priced purely based on scarcity. The price is based on the cost of extracting that resource, and the rate that it can be extracted. Although the resource is always just being depleted, the price does not necessarily have to go up. It may take more “effort” to extract the resource as it gets depleted, but the effort is not necessarily translated to having a higher cost because of new technology. One example is the overfishing of tuna. Although tuna populations have dropped substantially, tuna prices have not gone up enough to decrease consumption substantially because of technology that makes it easy for fishermen to find and catch the athletic fish. Yes, it does require more effort to catch the tuna now compared to before, but it is not more expensive.

This effect is also present in the petroleum industry. Most environmentalists were hoping that as oil gets depleted and it becomes more and more technically difficult to extract, it will become so expensive that we'll have to move to clean technology. However, because there have been so many technological developments, we are not rate limited or production cost limited. Deep water oil rigs are serious engineering productions, but the amount of oil in the deep waters is considerable. Then instead of substituting oil with clean energy, we might keep using oil and even more frustratingly, continue to engineer cheaper ways to extract it instead of just giving it up and working entirely on clean energy instead.

The only thing that is really expensive with these rigs is the cost of a major mishap such as the Gulf Oil Spill. As it becomes more and more risky, the engineering may become more and more risky, which will ultimately make it more expensive. Even so, the cost to the environment is often greater than the monetary cost to humans. Nature cannot be paid off.

Kansas Hypocrisy We Like

Conservative Kansas conserves energy for a change. Prof John Sterman has been touting the successes of Kansas in his talks for a while now. The picture is kind of silly, though, since candles have more carbon emissions/lumen than any other light bulb.

In a way they are being hypocritical if they still don't want Climate regulation since they benefit from it. In some sense, they are being much less hypocritical, though, because they are being true conservatives.

Solar Panels for the White House

NYT

"The White House did the right thing, and for the right reasons: They listened to the Americans who asked for solar on their roof, and they listened to the scientists and engineers who told them this is the path to the future," said McKibben, the co-founder of the nonprofit 350.org. "If it has anything like the effect of the White House garden, it could be a trigger for a wave of solar installations across the country and around the world." Bill McKibbon

Monetary System and the Environment

Tullett Prebon is a one of the world's largest inter-dealer money brokers. I'm not exactly sure what that means, but the Director of Global Operations, Tim Morgan, put out a paper called Dangerous Exponentials. It is not an academic paper, and I'm interested in whether there is potential for research in this area.

We need to know the impact of the monetary system on the environment and resource use. The monetary system of most of the world depends on an ever-increasing money supply for stability and thus constant but non-zero interest. There may be some value in analyzing how much of production and consumption is simply to service debt and interest rather than actually improve welfare. In Beyond Growth, Daly argued that exponential growth of real economic output per capita is not physically possible. A recent report by Tim Morgan, Dangerous Exponentials, echoes this concern, and describes society and the economy as "energy constructs." He proposes a theory that the abundance of cheap energy has allowed the monetary system to grow. Now that energy return on energy invested (EROEI) has now begun to decrease, the exponentially increasing public and private debt will not be able to be serviced. While some might claim that technological improvements will be able to outrun the needs of the monetary system, I am not convinced.

An environmentally sustainable society is technically possible, although it may require behavioral changes as well as radical innovation. However, the endogenous growth function does not give any insight into whether or not there are effects or constraints posed by the banking system. The financial sector is usually thought to be completely irrelevant to reaching environmental goals. There should be some formal analysis to show that the American monetary and financial system can support an economy seeking to reduce material consumption. Alternatively, theory may show a certain baseline of growth in energy usage and material throughput is required for a stable financial system.

Many economists are concerned about the high level of debt in developed countries. The political problems of this large debt make it difficult to build support for the environmentalist agenda, but it is unclear if there are technical problems as well. Private and public debt has been steadily increasing for the past 30 years in many developed countries such as the US and the UK. There are some perfectly legitimate or at least predictable reasons for the high level of debt that the US government currently has. We are still funding a war in Afghanistan and we just had an economic crash. The American public has been encouraged to consume and keep economic growth robust, although now it has become clear that we have been spending beyond our means. Furthermore, much of the US debt is held by China. The trade deficit with China and other Asian countries can be analyzed with an endogenous growth function with trade dynamics, but there may be unexpected behaviors that arise from the particulars of the US and Chinese monetary systems. It would be important to know how these behaviors interplay with reducing environmental impacts.

The Case for Environmental Economics Theory

This is actually the introduction to a long research paper I wrote about what I thought were important areas of research. A shorter version of the research paper is here.



It is clear that we have environmental problems, and they need to be addressed in the context of improving the economic well-being of Americans. Two mechanisms have been identified, which are to provide green jobs and build green industry. One is aimed at addressing economic concerns of the labor class, and the other is to address the concerns of businesses and investors. Even so, it is unclear how to incorporate the environmental agenda with the rest of economic and social policy. For example, the bank bailouts, healthcare reform, and financial regulatory legislation had no framework for determining whether or not they were in line with the environmental agenda. As a result, the environmental agenda has been marginalized even though it is indisputably important to the economic well-being of Americans in the long run.

To build a stronger case for comprehensive policymaking and put environmental policy on the map permanently, we need to develop a strong theoretical foundation. We should build upon the endogenous growth function to examine the dynamics of labor, material resource use, technology development, and the money supply. This foundation needs to be able to answer three key questions. The first is how do we create jobs by rebuilding the manufacturing sector while reducing emissions? The second is how can we make green businesses more profitable while creating enough well-paying jobs to keep unemployment low? The third is how do we foster a stable while robust monetary system and financial industry while reducing emissions and material throughput? These answers are not just needed in the United States. While others such as China and Europe may have made more headway in clean technology than the US has so far, they will soon need more direction to complete the transition to environmentally sustainable economies.