Solveig Glomsrød

The cost of soil erosion in Nicaragua

The cost of soil erosion is not so much dependent on the physical amount of soil lost as determined by the economic effects of these losses. Soil erosion has both onsite and offsite effects. Loss of soil productivity is the main onsite effect, while enhanced productivity of downstream land, sedimentation and eutrophication of waterways and reservoirs are common offsite effects. In this paper we consider only the onsite effects of erosion. The loss of agricultural productivity is, however, studied within a broader economic framework than usual. By incorporating the direct economic effects of soil loss into a general equilibrium model, it is possible to shed light on some of the many interlinkages between agricultural activity and other parts of the economy which are important for determining the social cost of soil erosion. Based on model simulations, we find that soil erosion represents a considerable drag on the Nicaraguan economy, but that the burden of soil erosion depends on conditions and policies in non-agricultural markets such as the labour market. Furthermore, the sharing of the burden is not always to the disadvantage of the peasants. While uncertainties in data and modelling prevent us from drawing strong conclusions, the present study underlines the importance of considering the overall economic environment when policy proposals for mitigating excessive soil erosion is formulated.

Stabilization of Emissions of CO2: A Computable General Equilibrium Assessment

A multisector computable general equilibrium model is used to study economic development perspectives in Norway if carbon dioxide emissions were stabilized. The effects discussed include impacts on main macroeconomic indicators and economic growth, sectoral allocation of production, and effects on the market for energy. The impact of pollutants other than carbon dioxide on emissions is assessed along with the related impact on noneconomic welfare. The results indicate that carbon dioxide emissions might be stabilized in Norway without dramatically reducing economic growth. Sectoral allocation effects are much larger. A substantial reduction in emissions to air other than carbon dioxide is found, yielding considerable gains in noneconomic welfare. Copyright 1992 by The editors of the Scandinavian Journal of Economics.

Soil degradation and economic development in Ghana

Soil erosion and soil mining are important environmental problems in many developing countries and may represent a considerable drag on economic development. The cost of soil degradation depends, however, not only on the productivity effects it has on agricultural growth, but also on how the agricultural sectors are linked to the rest of the economy. This article describes an integrated economy–soil-productivity model for Ghana, and through several simulated scenarios we calculate the drag on the Ghanaian economy of soil mining and erosion, and illustrate the effects of different policies aiming at a reduction in these environmental problems.

Environmental drag: evidence from Norway

Abstract Economic growth affects the environment negatively. A polluted environment and other environmental constraints reduce economic output and the well-being of consumers. The cost to society of environmental constraints may be called the environmental drag. The traditional economic analysis of growth neglects the environmental drag, while this paper attempts to measure it empirically. We employ a dynamic general equilibrium model of the Norwegian economy, extended to include some important environmental linkages, which feed back to the productivity of labor and capital from damages to health, materials and nature. The environment also directly affects the consumers’ well-being. Using this model, we are able to estimate the environmental drag, measured as reduced welfare from consumption and environmental services. We present macroeconomic effects in terms of reduced production and consumption, and calculate the overall welfare effects. We find that the environmental constraints incorporated in the model probably have a modest effect on production over the next century. The direct welfare loss from a degraded environmental quality, however, is significant. A lower rate of technological growth and a lower discount rate both increase the drag.

Structural adjustment and deforestation in Nicaragua

This paper investigates the impact of structural adjustment policies on deforestation taking place when the agricultural frontier advances into forest reserves in Nicaragua. A computable general equilibrium model incorporating deforestation by squatters is used for policy simulations. The opportunity cost of migrating to the frontier does not simply depend on wage income opportunity, but also on market prices of basic grain which determine the capacity to consume beyond subsistence food level within a certain real wage. Reducing public expenditures both conserve forests and enhance economic growth, while showing positive distributional effects. On the other hand, a strong conservation trend following a sales tax increase is driven by increasing poverty in rural areas. Noticeably, there are policies which initially intensify deforestation, but turn out to ease the pressure on forests over time. Rapid economic growth does not ensure less pressure on forest reserves.

A warmer policy for a colder climate: Can China both reduce poverty and cap carbon emissions?

Reducing global carbon dioxide (CO2) emissions is often thought to be at odds with economic growth and poverty reduction. Using an integrated assessment modeling approach, we find that China can cap CO2 emissions at 2015 level while sustaining economic growth and reducing the urban-rural income gap by a third by 2030. As a result, the Chinese economy becomes less dependent on exports and investments, as household consumption emerges as a driver behind economic growth, in line with current policy priorities. The resulting accumulated greenhouse gas emissions reduction 2016-2030 is about 60billionton (60Mg) CO2e. A CO2 tax combined with income re-distribution initially leads to a modest warming due to reduction in sulfur dioxide (SO2) emissions. However, the net effect is eventually cooling when the effect of reduced CO2 emissions dominates due to the long-lasting climate response of CO2. The net reduction in global temperature for the remaining part of this century is about 0.03±0.02°C, corresponding in magnitude to the cooling from avoiding one year of global CO2 emissions.

Soil Degradation in Macro CGE Models

Soil degradation is a widespread and serious threat to poor developing countries. The large contribution of agriculture to the national economies of these countries makes partial analysis of soil degradation insufficient. Soil productivity loss affects the urban economy through food prices, demand for farm inputs and consumer goods. Also, general economic policies create incentives that influence farm practices and the pressure on soil resources. To focus these interactions, soil degradation has been incorporated in macro CGE models. Two approaches are presented in this paper. One incorporates soil productivity with nitrogen as limiting factor in a CGE model for Tanzania, forecasting inputs of fertiliser, land and output by eleven crops. The use of fertiliser and amount of recycled crop residues determine the rate of soil productivity loss. Deforestation for subsistence agriculture has been modelled in a CGE for Nicaragua. Migration to the agricultural frontier is encouraged by the imputed income from producing their own diet, and serves as an alternative to rural/urban employment or urban unemployment. Policy simulations show that economic reforms like devaluation have significant impacts on land use and nutrient mining. Deforestation for subsistence agriculture is sensitive to income distribution and changes in food prices. High economic growth does not guarantee forest conservation.

Future emissions to air in Norway: Forecasts based on the macroeconomic Model MSG-4E

219 Environmental problems, and in particular air pollution, are linked to economic activities. General economic equilibrium models are therefore adequate tools in forecasting future emissions to air, and in analysing effects and costs associated with control measures. Due to uncertain forecasts, care must be taken in interpreting the results. Rather than giving the exact number of tons emitted in a future year, the forecasts serve as indicators on whether or not expected economic development is likely to produce unacceptably high stresses on the environment. If regulatory measures are introduced as a consequence of such signals, the forecasts, hopefully, tum out to be wrong. Thus, it is important that emission forecasts are updated as an integral part of the general planning process.

Business as UNusual: The Implications of Fossil Divestment and Green Bonds for Financial Flows, Economic Growth and Energy Market

Green bonds and fossil divestment has emerged as a bottom-up approach to climate action within the business community. Recent pledges by large banks and institutional investors have reached levels that have the potential to contribute markedly to a low carbon transition. This paper traces the impact of green finance in a multiregional global general equilibrium model with non-fossil and non-coal segments of financial flows in addition to the usual unconstrained market for funding. Our high green finance scenario reflects a reasonable upscaling of current level of pledges towards 2030. The study shows that green finance shifts the investments towards industries generating more value added and increasing GDP, future savings and investments. The green finance leads to a lower return on investments and a transfer of income from investors to wage income. Russia and China see the largest cost increase in coal investments due to constraints on finance for fossil industries. The green finance reduces coal consumption by 2.5 per cent below BAU in 2030 and raises the share of non-fossil electricity from 42 to 46 per cent at the global level. Over the whole period towards 2030, the green finance avoids global CO2 emissions corresponding to the total emissions of European Union and Japan in a recent year.