Gernot Wagner

Energy policy: The rebound effect is overplayed

Increasing energy efficiency brings emissions savings. Claims that it backfires are a distraction, say Kenneth Gillingham and colleagues.

The Rebound Effect and Energy Efficiency Policy

What do we know about the size of the rebound effect, the well-known phenomenon that improving energy efficiency may save less energy than expected due to a rebound of energy use? Is there any validity to the claims that energy efficiency improvements can actually lead to an increase in energy use (known as backfire)? This article clarifies what the rebound effect is and provides a guide for economists and policymakers interested in its existence and magnitude. We discuss how some studies in the literature consider a rebound effect that results from a costless exogenous increase in energy efficiency, whereas others examine the effects of a specific energy efficiency policy—a distinction that leads to very different welfare and policy implications. We present the most reliable evidence available about the size of the energy efficiency rebound effect and discuss situations where such estimation is extraordinarily difficult. With this in mind, we present a new way of thinking about the macroeconomic rebound effect. We conclude that overall, the existing research provides little support for the so-called backfire hypothesis. However, our understanding of the macroeconomic rebound effect remains limited, particularly as it relates to induced innovation and productivity growth. (JEL: H23, Q38, Q41)

Climate policy: hard problem, soft thinking

Climate change is more uncertain, more global, and more long-term than most issues facing humanity. This trifecta makes a policy response that encompasses scientific correctness, public awareness, economic efficiency, and governmental effectiveness particularly difficult. Economic and psychological instincts impede rational thought. Elected officials, who cater to and foster voters’ misguided beliefs, compound the soft thinking that results. Beliefs must change before unequivocal symptoms appear and humanity experiences the climate-change equivalent of a life-altering heart attack. Sadly, it may well take dramatic loss to jolt the collective conscience toward serious action. In the long run, the only solution is a bottom-up demand leading to policies that appropriately price carbon and technological innovation, and that promote ethical shifts toward a world in which low-carbon, high-efficiency living is the norm. In the short term, however, popular will is unlikely to drive serious action on the issue. Policy makers can and must try to overcome inherent psychological barriers and create pockets of certainty that link benefits of climate policy to local, immediate payoffs. It will take high-level scientific and political leadership to redirect currently misguided market forces toward a positive outcome.

Climate Sensitivity Uncertainty: When is Good News Bad?

Climate change is real and dangerous. Exactly how bad it will get, however, is uncertain. Uncertainty is particularly relevant for estimates of one of the key parameters: equilibrium climate sensitivity—how eventual temperatures will react as atmospheric carbon dioxide concentrations double. Despite significant advances in climate science and increased confidence in the accuracy of the range itself, the ‘likely’ range has been 1.5–4.5°C for over three decades. In 2007, the Intergovernmental Panel on Climate Change (IPCC) narrowed it to 2–4.5°C, only to reverse its decision in 2013, reinstating the prior range. In addition, the 2013 IPCC report removed prior mention of 3°C as the ‘best estimate’. We interpret the implications of the 2013 IPCC decision to lower the bottom of the range and excise a best estimate. Intuitively, it might seem that a lower bottom would be good news. Here we ask: when might apparently good news about climate sensitivity in fact be bad news in the sense that it lowers societal well-being? The lowered bottom value also implies higher uncertainty about the temperature increase, definitely bad news. Under reasonable assumptions, both the lowering of the lower bound and the removal of the ‘best estimate’ may well be bad news.

Energy policy: Push renewables to spur carbon pricing

Putting a price on carbon dioxide and other greenhouse gases to curb emissions must be the centrepiece of any comprehensive climate-change policy. We know it works: pricing carbon creates broad incentives to cut emissions. Yet the current price of carbon remains much too low relative to the hidden environmental, health and societal costs of burning a tonne of coal or a barrel of oil1. The global average price is below zero, once half a trillion dollars of fossil-fuel subsidies are factored in.

Reflections–Managing Uncertain Climates: Some Guidance for Policy Makers and Researchers

Climate change—and, by extension, climate policy—is beset with unknowns and unknowables. This “Reflections” article presents an overview of approaches to managing climate uncertainties, in the hopes of providing guidance for current policy decisions as well as future research. We propose the following guidance for policy makers: Treat climate change as a risk management problem; recognize that benefit-cost analysis is only the first of many steps in deciding on optimal climate policy; in assessing abatement choices, use a discount rate that declines over time; recognize the importance of framing, evidence, and connecting the dots; reward modesty. We suggest the following questions for consideration by researchers: Can we improve forecasting? Can we improve the way we address nonlinearities and possible irreversibilities? What other (sub)disciplines merit a closer look? How can we create the right incentives for updating and expanding economic damage functions and climate-economy models? What alternative decision criteria merit further exploration? What does ‘not knowing’ tell us?

Night-time lights: A global, long term look at links to socio-economic trends

We use a parallelized spatial analytics platform to process the twenty-one year totality of the longest-running time series of night-time lights data—the Defense Meteorological Satellite Program (DMSP) dataset—surpassing the narrower scope of prior studies to assess changes in area lit of countries globally. Doing so allows a retrospective look at the global, long-term relationships between night-time lights and a series of socio-economic indicators. We find the strongest correlations with electricity consumption, CO2 emissions, and GDP, followed by population, CH4 emissions, N2O emissions, poverty (inverse) and F-gas emissions. Relating area lit to electricity consumption shows that while a basic linear model provides a good statistical fit, regional and temporal trends are found to have a significant impact.

The Political Economy of Greening the National Income Accounts

While the United Nations and many other countries are actively exploring green accounting, official efforts in the United States have come to a virtual halt. In 1994, Congress commissioned a high-level study reviewing the Bureau of Economic Analysis’s (BEA) work on its Integrated System of Environmental and Economic Accounts (ISEEA), but since its publication in 1999 has ignored the results and continued to bar BEA from its efforts. The debate surrounding green accounting in the U.S. should be freed from the partisan struggle in Washington and moved in the hands of the scientific community. Green accounting efforts should seriously focus on including ecological services as well as mere resource depreciation, but in line with the recommendations of Nordhaus and Kokkelenberg (1999), the existing national income and product accounts framework should be used as a point of departure, and the creation of official accounts should employ an incremental approach, giving first priority to areas where the necessary research is available.

The Role of Civil Society in Recalibrating Conservation Science Incentives

The gap between research and practice is well known in environmental sciences and policy, particularly by practitioners. It is one thing to define important research questions and set priorities (Sutherland et al. 2009; Fleishman et al. 2011; Braunisch et al. 2012); it is quite another to create the right incentives to pursue them. Pressure to publish in top-tier, disciplinary journals is intense (Card & DellaVigna 2013). And because top-tier journals reflect the insular nature of the scientific process, where excellence is defined by novelty, elegance, and conceptual advance, rather than specific, applicable solutions to difficult problems, decks are often stacked against scientists exploring areas with immediate policy relevance. There is clear recognition—both within some academic institutions and within civil society organizations—that this condition reduces the impact and relevance of science on conservation policy and practice (Uriarte et al. 2007). Civil society organizations depend on knowledge creation from academic disciplines. If or because these organizations want a larger portion of academics to work on solutions to difficult problems with immediate relevance, they need to reduce the direct and indirect costs of that relevance. Civil society must provide stronger and more creative incentives to bring disciplinary experts together around the complex issues that will have the greatest impact on conservation success, and they need to work harder to define and communicate what these complex issues are. This issue extends beyond conservation, and in other domains, substantial investment has been put into building appropriate incentives. Examples include solution-centered competitions in global health and development (Novy-Hildesley 2010), prizes for grand innovation challenges (Brunt et al. 2012; Murray et al. 2012), and young innovator awards. Conservation communities can learn from these models, though clearly not without adapting them. Conservation issues are diverse, and many of the most important require coordination across many disciplines. Consider one example: An up-to-date, evidence-based estimate of the social cost of carbon would greatly benefit efforts to update government rules for the mitigation of climate change. For years, practitioners have been calling for collective effort, but progress has been slow. This is not surprising. Solutions to this problem will require large-scale research programs bringing together climate modelers, natural scientists, economists, and a host of practitioners. Without practical structures and incentives to support this work, such broad collaborative research is unlikely to attract top academic talent; opportunity costs are high, due in part to the coordination required for effective work across institutional boundaries (Cummings & Kiesler 2007). Thus, some of the most prominent economic models for the impact of climate change use climate damage estimates that have long lagged behind the latest science and that underestimate the full damages (Kopp & Mignone 2012). The official U.S. estimate for the social cost of carbon is just shy of

Solar geoengineering and the chemtrails conspiracy on social media

40/tons of CO2 (U.S. Interagency Working Group on Social Cost of Carbon 2013). That is, in fact, almost twice as high as 3 years ago (Greenstone et al. 2013). Yet some unofficial estimates suggest the true cost may much higher still (Pycroft et al. 2011; Ackerman & Stanton 2012; Dietz 2012; Kopp & Mignone 2012). This discrepancy has important economic and environmental consequences for setting policy, where benefit-cost calculations rely on the social cost of carbon for estimating the benefits of new and existing rules. Only now are we seeing emerging research examining the knowledge gaps in each relevant sector, a step often brokered by civil society. Any path forward will require increasing the pace of change in academic reward systems (Uriarte et al. 2007) through closer collaboration between practitioners and academic researchers, with much of the burden resting on the former. Civil society organizations need to use their convening power, audience outreach, funding capacity, and unique data to help shift research-funding priorities and expand the academic mandate (e.g., Colon-Rivera et al. 2013). All of this also helps spur researchers to answer immediately relevant policy questions and to work to create change from within rather than outside traditional academic incentive structures. One incentive is money. More funding is the most direct path to closing the incentive gap, but it is not a complete solution. Because the needs of conservation sciences are cross-disciplinary and collaborative and the deliverables often fall outside traditional academic success metrics (publication in high-impact journals), funding alone may not be effective. Academic disciplines are largely built on reputation economies with strong social backbones. This characteristic of academia points to the value of creating and sustaining networks that increase the national and international status of academics interested in maximizing the relevance of their work. Civil society may be best served by attracting the attention of early-career scientists and by establishing agile partnerships. The most important commodity for young scientists is time: US graduate students take 7–8 years on average to get their PhDs (Hoffer & Welch 2006). A good portion of that time is spent identifying research questions and collecting data. Putting more emphasis on organizing, curating, and communicating access to questions, data, and field support for research could allow civil society organizations to engage emerging academic talent with the questions and issues with the greatest capacity to create change. Besides money and access to data, another successful model is that of small, focused working groups that connect experts on a particular set of questions. These are not conferences; rather, they are groups focused on synthesis. Such working groups reduce the costs of collaboration across disciplines by repeatedly bringing people together in intense working environments (Hampton & Parker 2011). In the natural sciences, the working group model of collaboration and synthesis was popularized by the U.S. National Center for Ecological Analysis and Synthesis, and it has since been repeated in other countries and across disciplines (e.g., the Synthesis Centre for Biodiversity Sciences in Germany, the Center for Synthesis and Analysis of Biodiversity in France, and the National Socio-Environmental Synthesis Center in the United States). Environmental NGOs are beginning to use similar models to focus and incentivize policy-relevant research, from the Luc Hoffmann Institute at the World Wide Fund for Nature and the Science for Nature and People collaborative of The Nature Conservancy, the Wildlife Conservation Society, and the National Center for Ecological Analysis and Synthesis to the emerging issues workshops and academic collaborations of the Environmental Defense Fund. These efforts are being complimented by university-led initiatives, such as the Cambridge Conservation Initiative, which combines the colocation of NGOs on campus with strong financial incentives for collaborative research. The collaborative work models driving these efforts should be strengthened and replicated, with the aim of producing and sustaining communities of academics and practitioners that gain as much from their collaboration on cross-disciplinary issues as they do from their disciplinary work. Meeting this goal will require careful consideration of the successes and failures within the science policy interface, ranging from stronger coordination with intergovernmental efforts, such as the Intergovernmental Platform on Biodiversity and Ecosystem Services (Pe’er et al. 2013), to greater engagement with research groups, such as the Science Policy Interface Project (SPIRAL), that focus explicitly on promoting a more effective interface between science and policy communities (Young et al. 2013). Successful collaborations will allow NGOs and academics to react more quickly to emerging policy issues and provide a stronger, evidence-based position for decision making. Connecting these seemingly disparate communities and aligning research priorities with research needs will create solutions with benefits for civil society, academics, and the science and practice of conservation.