David Roland-Holst

Challenge of biofuel: filling the tank without emptying the stomach?

Biofuels have become a leading alternative to fossil fuel because they can be produced domestically by many countries, require only minimal changes to retail distribution and end-use technologies, are a partial response to global climate change, and because they have the potential to spur rural development. Production of biofuel has increased most rapidly for corn ethanol, in part because of government subsidies; yet, corn ethanol offers at most a modest contribution to society’s climate change goals and only a marginally positive net energy balance. Current biofuels pose long-run consequences for the provision of food and environmental amenities. In the short run, however, when gasoline supply and demand are inelastic, they serve as a buffer supply of energy, helping to reduce prices. Employing a conceptual model and with back-of-the-envelope estimates of wealth transfers resulting from biofuel production, we find that ethanol subsidies pay for themselves. Adoption of second-generation technologies may make biofuels more beneficial to society. The large-scale production of new types of crops dedicated to energy is likely to induce structural change in agriculture and change the sources, levels, and variability of farm incomes. The socio-economic impact of biofuel production will largely depend on how well the process of technology adoption by farmers and processors is understood and managed. The confluence of agricultural policy with environmental and energy policies is expected.

Macroeconomic structure and computable general equilibrium models

Abstract Economy-wide analysis can be undertaken within three different accounting frameworks: (1) the national income and product accounts, which focus on balance among macroaggregates; (2) the input-output accounts, which focus on intermediate flows and on the sectoral composition of production and demand; and (3) the social accounting matrix (SAM), which provides a framework incorporating both national income and product as well as input-output information. All three of these frameworks have been used to develop fixed coefficient, linear multiplier models. Keynesian multipliers at the macro level have multisectoral counterparts in the input-output model and “multi-institutional” counterparts in SAM-based models. These linear multiplier models tend to be completely demand driven and do not incorporate supply constrains or substitution possibilities. Computable general equilibrium (CGE) models have been developed which capture nonlinear substitution possibilities and multisectoral supply-demand interactions, and also incorporate macro variables and mechanisms for achieving balance among aggregates. “Marginal” multipliers can be derived for CGL models using the Jacobian matrix of partial derivatives at a given equilibrium. This paper develops an approach to analyzing Jacobian multipliers from a CGE model that decomposes macro, sectoral, and institutional linkages in a SAM framework. We give an illustration of SAM-multiplier decomposition using a small CGE model of the United States.

The Environment and Welfare Implications of Trade and Tax Policy

Developing countries with comparative advantage in dirty industries face the risk of environmental degradation unless appropriate policies are implemented. Using applied general equilibrium analysis, we examine how trade influences the environment and assess the welfare and environmental implications of alternative pollution abatement policies for Indonesia. Our results indicate that unilateral trade liberalization by Indonesia would increase the ratio of emission levels to real output for almost all major pollution categories. More importantly, when tariff removal is combined with a cost-effective tax policy, the twin objectives of welfare enhancement and environmental quality improvement appear to be feasible. This sheds new and positive light on the role of trade in sustainable development.

Industrial Food Animal Production and Global Health Risks: Exploring the Ecosystems and Economics of Avian Influenza

Many emerging infectious diseases in human populations are associated with zoonotic origins. Attention has often focused on wild animal reservoirs, but most zoonotic pathogens of recent concern to human health either originate in, or are transferred to, human populations from domesticated animals raised for human consumption. Thus, the ecological context of emerging infectious disease comprises two overlapping ecosystems: the natural habitats and populations of wild animals, and the anthropogenically controlled habitats and populations of domesticated species. Intensive food animal production systems and their associated value chains dominate in developed countries and are increasingly important in developing countries. These systems are characterized by large numbers of animals being raised in confinement with high throughput and rapid turnover. Although not typically recognized as such, industrial food animal production generates unique ecosystems—environments that may facilitate the evolution of zoonotic pathogens and their transmission to human populations. It is often assumed that confined food animal production reduces risks of emerging zoonotic diseases. This article provides evidence suggesting that these industrial systems may increase animal and public health risks unless there is recognition of the specific biosecurity and biocontainment challenges of the industrial model. Moreover, the economic drivers and constraints faced by the industry and its participants must be fully understood in order to inform preventative policy. In order to more effectively reduce zoonotic disease risk from industrial food animal production, private incentives for the implementation of biosecurity must align with public health interests.

Impacts of avian influenza virus on animal production in developing countries

This paper reviews the (predominantly grey) literature on impacts of highly pathogenic avian influenza (HPAI) strain H5N1 and control responses on the livestock sector and associated industries in developing countries. The authors distinguish between impacts that arise directly through HPAI-related morbidity and mortality, those that are a consequence of public intervention to control or eradicate HPAI, and impacts that are mediated through market reactions. The paper further considers how these impacts propagate up- and downstream through related supply and distribution networks, how short-term reactions are followed by longer-term adjustments, how impacts include direct cost elements and foregone income, and why losses to the poultry sector will, at least to some extent, be ‘passed on’ on the one hand, for example through compensation, and, on the other hand, be compensated for by gains in other livestock subsectors. Differences in methodology applied in the reviewed reports result in a lack of comparability of estimates for HPAI ‘costs/impacts’ across countries and even within countries and are compounded by information deficits. Despite these shortcomings, the literature permits some significant conclusions to be drawn on the relative importance of direct and indirect impacts and on their distribution across different types of poultry producers. The paper ends by outlining directions of future research that combine epidemiology and economics to provide a framework for disease control decisionmaking.

Modeling Prices in a SAM Structure

The aim of this paper is to develop an intersectoral price model in a social accounting matrix. Traditionally, the emphasis of the social accounting methodology has been on quantity oriented models and their income effects. In contrast, the authors use the social accounting matrix to develop a price model that captures the interdependence among activities, households, and factors and provides a complete set of accounting prices. Furthermore, they use decomposition techniques to trace underlying general equilibrium effects. Copyright 1995 by MIT Press.

Trade integration, environmental degradation, and public health in Chile: assessing the linkages

We use an empirical simulation model to examine links between trade integration, pollution, and public health in Chile. We synthesize economic, engineering, and health data to elucidate this complex relationship and support more coherent policy. Trade integration scenarios examined include Chiles accession to the NAFTA, MERCOSUR, and unilateral opening to world markets. The latter scenario induces substantial worsening of pollution, partly because it facilitates access to cheaper and dirty energy, and has a significant negative effect on urban morbidity and mortality. Damages caused by rising morbidity and mortality are of similar magnitude and substantial. Emissions of small particulates, SO2, and NO2, have the strongest impact on local mortality and morbidity. These three pollutants appear to be complementary in economic activity. Unilateral trade integration combined with a tax on small particulates brings welfare gains, which are 16 per cent higher than those obtained under unilateral trade reform alone.

The trade and environment nexus in Mexican agriculture. A general equilibrium analysis

This paper analyzes linkages between growth, trade and the environment in Mexican agriculture with an empirical economy-wide model. The investigation considers trade liberalization, environmental policy reform, and their coordination. The analysis decomposes the change in pollution emission induced by changes in the sectoral composition of production, effects of technology on emission intensity, and aggregate scale effects. Outward orientation alone induces a contraction of aggregate agricultural output, but promotes growth and pollution in some agricultural sectors. Overall, free trade does not induce wholesale specialization in dirty agricultural activities. Environmental taxes on pollution emitted in agricultural sectors have a moderate negative impact on agricultural output, except for the tax on water-borne toxic chemicals. More liberal trade combined with targeted effluent taxes can achieve significant environmental mitigation and efficiency gains, but with the implication of a contraction of most agricultural sectors.

Trade and the Environment in General Equilibrium: Evidence from Developing Economies

List of Figures. List of Tables. List of Acronyms and Abbreviations. List of Contributors. Preface. Part A: Methodology and Modelling. 1. Globalisation and the Environment from a Development Perspective J. Beghin, D. Roland-Holst, D. Van der Mensbrugghe. 2. Trade and Environmental Policy Instruments and Reforms J. Beghin. 3. Empirical Modelling of Trade and the Environment J. Beghin, S. Dessus, D. Roland-Holst, D. Van der Mensbrugghe. 4. Input-Based Pollution Estimates for Environmental Assessment in Developing Countries S. Dessus, D. Roland-Holst, D. Van der Mensbrugghe. 5. Modelling Health Impacts of Air Pollution and Their Valuation: An Application to Santiago, Chile B. Bowland, J. Beghin. Part B: Case Studies. 6. Growth, Trade, and the Environment Nexus in Chile: A Comprehensive Assessment J. Beghin, S. Dessus, D. Roland-Holst, D. Van der Mensbrugghe. 7. Trade Liberalisation and the Environment in China S. Dessus, A. El Obeid, D. Van der Mensbrugghe. 8. Coordinated Trade and Environmental Policies for Morocco D. Roland-Holst, M. Bussolo. 9. Outward Orientation, Growth, and the Environment in Vietnam A. El Obeid, D. Van der Mensbrugghe, S. Dessus. 10. Synthesis of Case Studies on Indonesia, Mexico, and Costa Rica A. El Obeid. 11. Conclusions J. Beghin, D. Roland-Holst, D. Van der Mensbrugghe. Index.

Interindustry Analysis with Social Accounting Methods

This paper evaluates the role of income-expenditure linkages in interindustry analysis. Using matrix decomposition methods and a social accounting matrix of the USA, it is shown that multiplier estimates which omit such linkages are not reliable measures of the effects of exogenous shocks upon industrial output and income. The paper further applies the decomposition method to study relative income determination between sectors, i.e. how the composition of national product changes in response to exogenous shocks.