The Unassuming Economist

A new IMF report says that: “By 2100, climate change could impact more than 12 percent of the Vietnamese population and reduce growth by 10 percent. The Vietnamese government considers the response to climate change a vital issue and has implemented environmental policies to better cope with these risks.”

“But the country—which has relied heavily on fossil fuels and overexploitation of natural resources—needs to further adapt its economy toward a more sustainable and ecofriendly growth model.”

“Policies that can better prepare Vietnam for the future impact of climate change should focus on:

• Lowering the intensity of fossil fuels in Vietnam’s GDP: raising the contribution of renewable energy would help to break the link between greenhouse gas emissions and output.
• Providing stronger incentives for households, firms, and government to pursue green growth: taxation of fossil fuels that fully prices environmental and health externalities would nudge energy demand toward renewables and generate revenue to finance adaptation and mitigation plans.
• Investing in climate resilient infrastructure would help households and firms cope with storms. The expected cost of natural disasters could be usefully included in public debt sustainability analyses.
• Promoting research and development and other innovation policies can provide further incentives to investment in existing clean energy sources and improvements in clean technologies.
• Shifting to autonomous, electric, shared vehicles, as already planned in Singapore, would help reduce congestion and pollution in cities. Improved government capacity to coordinate technological change and promote innovation and green growth would be key.”

Hendry reports per capita UK CO2 emissions, “which rose considerably till 1916, fluctuated violently till 1950, and have dropped dramatically since 1970” (see Hendry, 2017b).

“The sub-period distributions of UK CO2 emissions in [the figure below] illustrate their changes in shape, spread and location.”

My working paper with Gail Cohen, Joao Jalles and Ricardo Marto shows how production-based emissions and consumption-based emissions differ in the UK. Both the cyclical components and the trend components are shown in the figure below.

From the IMF’s latest report on Albania:

“Natural gas will have significant implications on Albania in the medium term. Substituting natural gas for electricity will reduce business costs and households’ expenses. The cost reductions for firms and households will not be minor considering the cost of heating can be reduced to 1/3 by substituting natural gas for electricity. The challenge is that the existing pipelines and distribution networks are almost obsolete.

Construction of new pipelines and distributions networks will be needed. The government is already analyzing the cost and potential tariffs. The economically feasible infrastructure has an approximated cost of €0.5 billion for the distribution network and about €0.2-0.3 billion for the main pipelines. A key component of this new infrastructure will be Ionian Adriatic Pipeline (IAP) to bring natural gas from Trans Adriatic Pipeline (TAP) to the main urban centers (including Tirana).

The development of this infrastructure will require significant efforts to attract private sector investment. Building a sound regulatory framework is a key priority.”

From a new IMF working paper:

“We present estimates of welfare by country for 2007 and 2014 using the methodology of Jones and Klenow (2016) which incorporates consumption, leisure, mortality and inequality, and we extend the methodology to include environmental externalities. During the period of the global financial crisis welfare grew slightly more rapidly than income per capita, mainly due to improvements in life expectancy. This led to welfare convergence in most regions towards advanced country levels. Introducing environmental effects changes the welfare ranking for countries that rely heavily on natural resources, highlighting the importance of the natural resource base in welfare. This methodology could provide a theoretically consistent and tractable way of monitoring progress in several Sustainable Development Goal (SDG) indicators.”

From a new IMF working paper: “We present a dynamic small open economy model to explore the macroeconomic impact of natural disasters. In addition to permanent damages to public and private capital, the disaster causes temporary losses of productivity, inefficiencies during the reconstruction process, and damages to the sovereign’s creditworthiness. We use the model to study the debt sustainability concerns that arise from the need to rebuild public infrastructure over the medium term and analyze the feasibility of ex ante policies, such as building adaptation infrastructure and fiscal buffers, and contrast these policies with the post-disaster support provided by donors. Investing in resilient infrastructure may prove useful, in particular if it is viewed as complementary to standard infrastructure, because it raises the marginal product of private capital, crowding in private investment, while helping withstand the impact of the natural disaster. In an application to Vanuatu, we find that donors should provide an additional 50% of pre-cyclone GDP in grants to be spent over the following 15 years to ensure public debt remains sustainable following Cyclone Pam. Helping the government build resilience on the other hand, reduces the risk of debt distress and at lower cost for donors.”