'Low oil price? increase carbon price!' 4 - The Economist edition

The Economist opens with a similar argument as the previous three posts on this topic (van Ardenne, Summers, Cochrane). However, they have a broader outlook, with different policies most advised for different parts in the world.

Due to the low oil price, which is expected to stay low for a while,

[politicians] can get rid of billions of dollars of distorting subsidies, especially for dirty fuels, whilst shifting taxes towards carbon use. A cheaper, greener and more reliable energy future could be within reach.

'Bin' the subsidies to oil companies (US) and consumers around the world (India, Indonesia, Venezuela); while taxing fossil fuels where it's not done yet (US) and integrate energy/electricity markets (EU), they recommend. In general, a complete overhole of energy policies may be needed in many countries. The low price of energy today makes it less politically daunting to actually do so.

OxCARRE seminars this term

Hilary Term 2015

OxCarre Seminar Series

***Tuesdays at 14.30hrs***

Seminar Room C

Manor Road Building, Manor Road

27 January

Speaker: Sol Hsiang (University of California, Berkeley)

Title: TBC

10 February

Speaker:  Simon Dietz (Grantham Research Institute on Climate Change and the Environment, LSE)

Title: Spaces for Agreement: A theory of Time-Stochastic Dominance and an application to climate change

24 February

Speaker:  Kamiar Mohaddes (Cambridge)

Title: Fair Weather or Foul? The Macroeconomic Effect of El Niño.

10 March

Speaker: Renaud Coulomb (Grantham Research Institute on Climate Change and the Environment, LSE)

Title: TBC

'Low oil price? increase carbon price!' 3 - John Cochrane edition

John Cochrane responded, already a week ago, to Larry Summers op-ed on a carbon tax. He notes some comments from others and brings forth a few of his own thoughts. On of main ones is that a tax on carbon is not the only way to increase the price (so my blog series title remains valid, phew), how about a cap-and-trade, he asks.

The post pulls the idea very much into the American context. In particular, talking about a new tax breaks open the pandora box on income distribution and loopholes. The main idea of course was much generally applicable. So what is happening in other places. For instance, is there talk on further reducing the number of permits available in the European Emissions Trading Mechanism?

As a matter of fact. There is already discussion ongoing at European levels (here [ft.com], here  and here [bloomberg.com]) to reduce the number of permits in the market to increase the price, currently around €6.70 [theice.com]. In summary, these discussions were already ongoing for a while because since the great recession there is a glut of permits, in the already overwhelmed market from time that governments gave away too many credits. Some of these permits will be taken from the market, potentially to be returned in the future. The fight is going to be whether they will be. In the short term, the price of permits is expected to rise by 50-60% by June this year. I found no mention that the current oil price place a role in these decisions. As Cochrane mentions in his post, referring to the oil price of 6 months ago, as Summers did, for new policy that may take at least another 6 months to form, but likely years, is not very convincing.

Outside Europe? South Korea will start its exchange on today (12 January, here [rsc.org] and see also the second Bloomberg article above). 

New Research: Extractive industries and poverty: A review of recent findings and linkage mechanisms

A meta-study on the connection between poverty and mining comes out particularly depressing, "we find industrial mining to be more frequently associated with poverty exacerbation".

Extractive industries and poverty: A review of recent findings and linkage mechanisms

by Jonathan Gamu [ubc.ca], Philippe Le Billon [ubc.ac] (both Liu Institute for Global Issues, UBC) and Samuel Spiegel [ed.ac.uk] (University of Edinburgh)

Abstract

This article surveys fifty-two empirical studies on relationships between extractive industries and poverty, addressing both poverty impacts and possible linkage mechanisms. Distinguishing these studies by mode of resource extraction, we find industrial mining to be more frequently associated with poverty exacerbation, and artisanal mining with poverty reduction. Poverty exacerbation findings are more pronounced in cross-national statistical studies and ethnographic local case studies, especially when relative deprivation and longer-term impacts are taken into account; while sub-national census-based studies tend to show lower poverty levels in areas with extractive sector activities. A review of thirteen specific linkages between extractive industries and poverty highlights the importance of governance institutions and the limited effects of Corporate Social Responsibility activities. Methodologically, our survey points to the dominance of industrial mining-related data in cross-national and sub-national studies and the overlooked effects of artisanal and small-scale mining on poverty reduction at analytical scales larger than community-level. Such findings call for integrated studies assessing effects on poverty at various scales and attending to the specificities of mining-related livelihoods. Nested mixed-methods including place-based ethnographic observation, longitudinal surveys, as well as socioeconomic and political analysis across multiple scales are needed to provide more robust contextual understandings of the relationships between extractive sectors and poverty.

Read further here [sciencedirect.com].

'Low oil price? increase carbon price!' 2 - Lawrence Summers edition

A few weeks ago, Maria van der Hoeven, executive-director of the International Energy Agency advocated a carbon tax introduction now that oil prices are low. Lawrence Summers advocates [FT.com] the same today for the US.  

IMF Fin&Dev: Sharing the Wealth

In last month's IMF publication Finance and Development, IMF Economists Sanjeev Gupta [sanjeevguptadocs.com], Alex Segura-Ubiergo [repec.org], and Enrique Flores [imf.org] wrote a piece on

Sharing the wealth

Countries that enjoy a resource windfall should be prudent about distributing it all directly to their people. The experience of the success stories suggests that natural resource wealth management requires a commitment to three interrelated principles: fiscal transparency, a rules-based fiscal policy, and strong institutions for public financial management. Some suggest that governments should give up their resource revenue and distribute it directly to the population. There are some good arguments to support this view—and strong arguments against it. Direct distribution is not a silver bullet. 

The article is a general audience edition of a discussion paper of them: Direct Distribution of Resource Revenues: Worth Considering? [imf.org pdf]

UK implements transparency guidelines for natural resource industry

The UK is moving forward in implementing transparency rules that aim to reveal the money flows between buyers, sellers and producers of natural resources. Last month it attained candidate status of the Extractive Industry Transparency Initiative. Since first January it's the first EU member state to implement the EU directive for extractive industries, which requires similar disclosure.

See here [ft.com] for the FT article, and here [resourcegovernance.org] from the Natural Resource Governance Institute.

New Research: Capital Mobility - resource Gains or Losses? How, When, and for Whom?

As the first post of the new year, some new research from
Hikaru Ogawa [nagoya-u.ac.jp] (Graduate School of Economics, Nagoya University)

Jun Oshiro [google.com] (Department of Law and Economics, Okinawa University) 

Andya Suhiro [google.com]  (Graduate School of Economics, Osaka University)

forthcoming in Journal of Public Economic Theory [wiley.com]

Capital Mobility—resource Gains or Losses? How, When, and for Whom?
Abstract:

This paper investigates which of the two types of countries—resource-rich or resource-poor—gains from capital market integration and capital tax competition. More specifically, we explore the effects of natural resources on the distribution of capital across countries, government reaction to capital flows, and the influence of capital flows and tax competition on regional welfare. We develop a framework involving vertical linkages through resource-based inputs as well as international fiscal linkages between the two types of countries. Our analysis shows that capital market integration causes capital flows from resource-poor to resource-rich countries and improves global production efficiency. However, such gains accrue only to resource-poor countries, and capital mobility might even negatively affect resource-rich countries. Furthermore, we show that resource-rich countries can exploit the gains when taxes on capital are available.