Levente Timar

Spatial and Temporal Responses to an Emissions Trading System Covering Agriculture and Forestry: Simulation Results from New Zealand

We perform simulations using the integrated Land Use in Rural New Zealand (LURNZ) model to analyze the effect of various New Zealand emissions trading scheme (ETS) scenarios on land use, emissions and output in a temporally and spatially explicit manner. We compare the impact of afforestation to the impact of other land-use change on net greenhouse gas emissions and evaluate the importance of the forestry component of the ETS relative to the agricultural component. We find that the effect of including agriculture in the ETS is small relative to the effect of including forestry. We also examine the effect of land-use change on the time profile of net emissions from the forestry sector. Finally, we present projections of future agricultural output under various policy scenarios.

Rural Land Use and Land Tenure in New Zealand

Private land-use decisions are critical for a broad spectrum of environmental and social outcomes, ranging from water quality and climate change to rural income distribution. I use a large dataset of the land-use decisions of New Zealand landowners to estimate a cross-sectional multinomial logit model of land use. In this model, the optimal land-use choice depends on geophysical attributes of the land, the cost of access to markets, and on land tenure (Māori freehold title versus general freehold title). I employ the estimated relationship in a counterfactual scenario to assess the overall impact of Māori tenure on the willingness of landowners to supply land for the four most important rural uses in the country: dairying; sheep or beef farming; plantation forestry; and an economically unproductive use, scrub. This allows me to conjecture about the environmental implications of New Zealand’s land-tenure system.

Land-use Intensity and Greenhouse Gas Emissions in the LURNZ Model

This paper documents the development of new land-use intensity and greenhouse gas (GHG) emissions modules for the Land Use in Rural New Zealand (LURNZ) model. These modules translate simulated land-use outcomes into measures of rural economic activity and greenhouse gas emissions for dairy farming and sheep-beef farming. Emissions in LURNZ include those from livestock as well as from synthetic fertiliser use. We utilise the latest set of emission factors along with information on the distribution of rural activities to model GHG emissions in a spatially and temporally explicit manner. Our results at the national level are approximately consistent with New Zealand’s Greenhouse Gas Inventory.

That Sinking Feeling: The Changing Price of Disaster Risk Following an Earthquake

We treat the Canterbury (Christchurch) earthquake sequence as a potential source of new risk information to home buyers in New Zealand. We compare pre- and post-earthquake sales of properties in two other urban areas of the country (one with high and one with low seismicity) to estimate how the pricing of earthquake-related risks changed following the Canterbury earthquakes. Specifically, we test for changes in risk premia associated with soil liquefaction potential, previously a largely ignored hazard, and changes in premia for house construction types (such as brick) that previously were well-known to be less safe in an earthquake. By exploiting two types of risk (one previously ignored and one well-recognised by households) across two areas with differing seismic risks, pre- and post-earthquake, we use a difference-in-difference-in-difference approach to test hypotheses about how people respond to a new clearly defined risk that is important only in certain circumstances. We find no evidence that the price of known construction risk changed in either seismic area and no evidence of a change in the price of liquefaction risk in the low seismic area following the Canterbury earthquakes. However, we do find strong evidence that a liquefaction risk discount emerged in the high seismic area immediately after the Canterbury earthquakes. These findings are all in accord with rational responses to risk following the earthquakes. However, the liquefaction risk discount in the high seismic area dissipated after two years and had disappeared entirely within three years of the earthquakes. This finding is similar to those identified in a limited number of previous empirical studies on responses to natural hazard events. While we cannot rule out entirely that this time-varying risk premium is a rational response to risk (e.g. because of changing expectations around insurable versus non-insurable risks), we find it more plausible that these changing risk discounts reflect behavioural responses to risk as indicated in the cognitive dissonance literature.

Before a Fall: Impacts of Earthquake Regulation and Building Codes on the Commercial Building Market

We test whether a major earthquake in one city (Christchurch, New Zealand) affects the prices of earthquake-prone commercial buildings in a city (Wellington) that was unaffected by the disaster. In particular, we test whether the official public declaration of a building as being earthquake-prone (with a corresponding requirement to remediate the building to minimum earthquake code requirements) has an effect on price over and above that experienced by similarly earthquake-prone (but not yet declared) buildings. We distinguish the latter by isolating sales of those buildings that are subsequently declared to be earthquake-prone. We find that in the CBD, the price discount that accompanies an official earthquake-prone declaration averages 45% whereas there is no observable discount on buildings that are subsequently declared earthquake-prone. Consistent with our theoretical model that anticipates forced sale of some officially declared earthquake-prone buildings, the probability of sale of officially declared earthquake-prone buildings rose markedly after the Christchurch earthquakes. Our results therefore show that officially declared earthquake-prone status has a considerable impact on the commercial property market that is separate from the effects of being earthquake-prone but where the building has not (yet) officially received that status.