Disease 'halves people's incomes' in tropical countries

Luís Amorim in SciDev.net: Tropical countries' per capita incomes could more than double if they managed to reduce their health burden from vector-borne and parasitic diseases (VBPDs) to that seen in temperate countries, a study has found.

The study says that poor economic performance is caused partly by high disease burden, which is in turn affected by biodiversity. Although VBPDs remain a leading cause of death and disability in poor countries, there is debate over their relative impact on global poverty patterns, the paper says.

Researchers from Harvard Medical School and Princeton University in the United States and from Université de Cergy-Pontoise in France set out to examine whether these diseases only played a historical role in delaying tropical countries' growth by limiting foreign investment and institutions' development, or whether environmental factors present in the tropics are the key element driving the VBPDs — which in turn still harming wealth production today.

If disease is still hindering development, then healthcare improvements should be made a key part of macroeconomic strategies and foreign economic aid, and not only be done for humanitarian reasons, the paper argues.

The researchers used models to estimate the relative effects of disease burden and per capita income on each other, controlling for other factors. The findings bolster the case for targeting diseases to lessen their impact on tropical countries' economic development, according to Matthew Bonds, lead author from Harvard Medical School....

Nurse Ubah Mahammed marks a child after administering de-worming medicine, Shinile Woreda, Ethiopia, Oct. 13, 2010. US Army photograph

Can vegans stomach the unpalatable truth about quinoa?

A comment by Joanne Blythman in the Guardian (UK): Not long ago, quinoa was just an obscure Peruvian grain you could only buy in wholefood shops. We struggled to pronounce it (it's keen-wa, not qui-no-a), yet it was feted by food lovers as a novel addition to the familiar ranks of couscous and rice. Dieticians clucked over quinoa approvingly because it ticked the low-fat box and fitted in with government healthy eating advice to "base your meals on starchy foods".

Adventurous eaters liked its slightly bitter taste and the little white curls that formed around the grains. Vegans embraced quinoa as a credibly nutritious substitute for meat. Unusual among grains, quinoa has a high protein content (between 14%-18%), and it contains all those pesky, yet essential, amino acids needed for good health that can prove so elusive to vegetarians who prefer not to pop food supplements.

Sales took off. Quinoa was, in marketing speak, the "miracle grain of the Andes", a healthy, right-on, ethical addition to the meat avoider's larder (no dead animals, just a crop that doesn't feel pain). Consequently, the price shot up – it has tripled since 2006 – with more rarified black, red and "royal" types commanding particularly handsome premiums.

But there is an unpalatable truth to face for those of us with a bag of quinoa in the larder. The appetite of countries such as ours for this grain has pushed up prices to such an extent that poorer people in Peru and Bolivia, for whom it was once a nourishing staple food, can no longer afford to eat it. Imported junk food is cheaper. In Lima, quinoa now costs more than chicken. Outside the cities, and fuelled by overseas demand, the pressure is on to turn land that once produced a portfolio of diverse crops into quinoa monoculture.

In fact, the quinoa trade is yet another troubling example of a damaging north-south exchange, with well-intentioned health and ethics-led consumers here unwittingly driving poverty there. It's beginning to look like a cautionary tale of how a focus on exporting premium foods can damage the producer country's food security....

Photo of quinoa by Vi..Cult..., Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Learning curves, negative and positive--a Carbon Based original

    Under most circumstances, the more we practice at a task or a project, the greater our skill. In a positive learning curve, the costs of acting go down as the rewards increase.  But in some instances, practice makes our performance worse.  Economists and psychologists describe a negative learning curve as one where the more we persist with an activity, the greater the costs we face.  Practice makes us worse off.

    A 2011 article by the vigorously anti-nuclear Joe Romm in Think Progress asked, "Does nuclear power have a negative learning curve?"According to the piece, even the most successful nuclear operations suffer from a sharp growth in construction and operating expenses, even after adjusting for inflation.  Unlike wind and solar, where the cost per kilowatt hour has been steadily dropping, nuclear's has climbed.  A 2007 Moody's study finds nuclear costs mounting from $4000 before 2007 to $5000 to $6,000 today. One case Romm cites in Florida is even more expensive.

    Lest you think that this is just a problem for the balkanized, inefficient, poorly regulated US, Romm links to a paper that finds the same pattern in France's nuclear industry. Arnulf Grubler of the International Institute for Applied Systems in Austria analyzed public records for Energy Policy and wrote “The costs of the French nuclear scale-up: A case of negative learning by doing”.

     The cost escalation has happened even though French reactor designs are standardized to a degree that impossible in the US, and even though costs go down per unit as the size of the reactor increases.   France has other advantages, too, such as a powerful, well-run state utility. But this hasn't saved it from the negative learning curve.  Grubler speculates that the French cost rise stems from the inherent complexity of nuclear technology, which demands "a formidable ability to manage complexity in both construction and operation."  It's an ability nobody has, not even Electricite de France. 

    Romm's stinging conclusion: "New nukes have gone from too cheap to meter to too expensive to matter." 

    So much for nuclear power (though I wonder whether the same objections would apply to thorium-based nuclear reactors).  But I'm struck by the notion of negative learning, defined as an activity that grows more costly the longer it's pursued.

    In the broader climate change landscape, the business as usual scenario -- the path we're on now -- exemplifies negative learning.  Sticking with our carbon-intensive ways entails worsening costs in the form of natural disasters, sea level rise and other impacts.  Most casual onlookers or organizations tend to regard climate impacts as random.  But they are externalities that follow predictably from burning fossil fuels.  The more greenhouse gases we emit into the atmosphere, the higher the costs go.

    One reason we remains stuck in this negative learning curve is ideological.  A substantial minority of American citizens have political objections to the kind of actions required to cut emissions drastically.

    Occasionally public opinions leans toward actually taking action against climate change, usually after a natural disaster.  That's when fossil fuel propagandists hurl themselves into the fray.  Hundreds of megaphones start blaring , stupefying the debate with a cacophony of marginal scientists, pro-capitalist think tanks, and industry flacks. A coalition of petroleum, steel, autos and utilities use their legislative clout to stop anyone from thinking about the origin of the growing costs, or noticing that they're not random. 

    This kind of political bind bedevils the whole world, not just the United States. The dispiriting fizzle of the latest round of international climate talks in Doha revealed yet again that the US inaction has global allies.  The motives of poorer countries are different from the wealthy nations, and stem largely from the urgent need to use energy to advance their development.  They have much catching up to do, and to reach the goal, they believe, they need a full energy portfolio, including fossil fuels.

    The irony is that with climate change, a positive learning curve awaits us when we cut emissions.  Because of the physical nature of growing concentrations of greenhouse gases in the atmosphere, early carbon mitigation can have huge benefits.  We have the power to avoid decades of growing costs.

    A recent report in Nature suggested that an international price on carbon at $20 per ton today gives the world an almost 60% chance of holding global temperature increases under 2°C. This temperature level would blunt the costliest impacts of global warming, including: rising sea levels, floods, droughts, and extreme weather.

    Unfortunately for slow learners or non-learners, the cost of action closely tracks the level of greenhouse gas concentrations.  By 2020, when the parts per million are higher, we will need a price of $100 per ton of carbon to achieve the same result.  If we wait until 2030, no price on carbon, no matter how expensive, will be able to hold the line on temperature. 

    Under these circumstances, the moral and economic case for action now is strong. Rather than linger in a negative learning curve, we should actually try to benefit from our experience.  But we live in a cynical, paralyzed, ungovernable time, when our elites cannot act on behalf of our species in any coherent way. 

Some learning curves from an 1899 issue of Popular Science Monthly

Delayed action raises costs of climate change, study says

EurActiv: An agreement by almost 200 nations to curb rising greenhouse gas emissions from 2020 will be far more costly than taking action now to tackle climate change, a new report says. Quick measures to cut emissions would give a far better chance of keeping global warming within an agreed UN limit of 2o Celsius above pre-industrial times to avert more floods, heatwaves, droughts and rising sea levels.

"If you delay action by 10, 20 years you significantly reduce the chances of meeting the 2o target," said Keywan Riahi, one of the authors of the report at the International Institute for Applied Systems Analysis in Austria.

"It was generally known that costs increase when you delay action. It was not clear how quickly they change," he told Reuters on Wednesday (2 January) of the findings in the science journal Nature Climate Change based on 500 computer-generated scenarios.

It said the timing of cuts in greenhouse gases was more important than other uncertainties - about things like how the climate system works, future energy demand, carbon prices or new energy technologies. The study indicated that an immediate global price of €15 a tonne on emissions of carbon dioxide (CO2), the main greenhouse gas, would give a roughly 60% chance of limiting warming to below 2o.

Wait until 2020 and the carbon price would have to be around €75 a tonne to retain that 60% chance, Riahi told Reuters of the study made with other experts in Switzerland, New Zealand, Australia and Germany. And a delay of action until 2030 might put the 2o limit - which some of the more pessimistic scientists say is already unattainable - completely out of reach, whatever the carbon price....

At Disneyland, the hat worn by Mickey Mouse in "The Sorcerer's Apprentice," shot by Fabi1994 at de.wikipedia, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Insurers to pay for close to half of the USD 140 billion in economic losses caused by natural catastrophes and man-made disasters

My former employer has come out with a new issue of their excellent risk publication:

• Economic losses from natural catastrophes and man-made disasters will likely reach at least USD 140 billion in 2012
• Weather events, primarily in the US, will dominate insured losses this year
• The re/insurance industry will cover approximately USD 65 billion of all losses, significantly contributing to post-disaster relief

According to Swiss Re sigma preliminary estimates, total insured losses from natural catastrophes and man-made disasters will reach approximately USD 65 billion in 2012. Natural catastrophes alone will lead to over 11 000 lives lost and roughly USD 60 billion in insured claims.

After a benign first half of the year, Hurricane Sandy and drought in the US in the second half of 2012 will lead to total economic losses from disasters of at least USD 140 billion. Insured losses arising from the catastrophic events of the year are set to reach roughly USD 65 billion. The tally is moderate compared to 2011, which saw historic insured losses of over USD 120 billion due to record earthquakes and flooding, but is above the average of the last 10 years.

Kurt Karl, Swiss Re’s Chief Economist, says: "Severe weather events continue to affect many parts of the world. Although insurance cannot bring back lost lives, many people and businesses can rely on financial relief from insurance cover, as is the case for the US. However, in large parts of the globe that are prone to severe weather events, people and businesses could increase risk-preparedness by eliminating underinsurance."...

Where are the climate change investments? A Carbon Based Original

    Markets can fall prey to inefficiencies or fail altogether. The annals of investment are replete with tales of visionary investors who find ways to exploit these failures.      Climate change, in addition to being a global emergency, is also a market failure.  In the words of climate economist Nicholas Stern in 2007, "Climate change is the greatest market failure the world has ever seen, and it interacts with other market imperfections."

    So where are the investors who are profiting from exploiting this failure?  In fact, their numbers are small, and so far their performance has not attracted other asset managers. 

    One disadvantages is that investors in climate change do not have need politicians committed to the right policies.  As Stern put it, "The first is the pricing of carbon, implemented through tax, trading or regulation. The second is policy to support innovation and the deployment of low-carbon technologies. And the third is action to remove barriers to energy efficiency, and to inform, educate and persuade individuals about what they can do to respond to climate change."

    Investments in the right actions face a political headwind. Instead of a concerted three-pronged push, would-be climate investors face virulent obstruction from conservative politicians.   These politicians and their fossil fuel backers work indefatigably to thwart all measures to price carbon. They do their utmost to thwart any large-scale post-carbon investing -- witness the near-criminalization of renewable energy at the hands of congressional Republicans.  They spout fossil fuel propaganda unabated even though governments and businesses pursue hundreds of small improvements in energy efficiency, and a majority of Americans believe climate change is real.

    Hostility from politicians and lobbyists is not the only obstacle. Psychology and cognitive habits place another barrier in the way of investing profitably in climate change action.

    Most people rarely notice long-term, lumbering problems for a number of cognitive and psychological reasons.  Their time horizon is too short. The climate signal emerges too slowly from the noise to command investors' attention.

    Traders, for example, operate in the briefest of short runs, and for them, climate change has hardly any existence at all. They buy securities, hold them for just a moment. 

    Investors work with a time horizon of three months to a year.  But even this somewhat longer field of view is the blink of the climate's eye. 

    Some asset managers defy this tendency, focusing on climate and renewable energy as investments, but most other investors quickly lose interest. 

    The time horizon problem even bedevils insurance, the one industry that cares the most about climate change right now.  Insurers have an immediate and obvious stake in reducing climate risk, since clients' disaster losses determine how profitable they are. 

    A growing number of property and casualty firms are focused on climate change. They are cutting their own emissions, taking climate into consideration in their portfolios, spelling out and communicating the risks of climate change, and even trying to influence policy. 

    Does this mean we should put our money in climate-savvy insurers?  Sometimes the industry does well, but the nature of the risk business prevents them from reaping extravagant payoffs. 

    The time horizon of insurers is one year -- policies are renewed every twelve months, usually in January.  Their judgment of their portfolios' risks only needs to be correct enough for a year. 

    Skill at assessing risk is only one part of the insurance business. The other half is investing. Insurers invest the premiums they take in, resulting in some of the largest asset pools in the world.  Their bias is conservative and short-term, since they might face large losses that could force them to unwind their portfolio in a hurry. In short, an insurer that has an acute understanding of climate risks has a better chance for staying in business, but it won't perform like a boom stock.

    Between the difficulty of thinking long term and fierce political opposition, sound climate investing has languished. That's alarming because all of us have a stake in stopping greenhouse gas emissions and reducing the harshness of its impacts. It should be profitable to do so.

Dunes at Gran Canaria, shot by Marc Ryckaert (MJJR), Wikimedia Commons, under the Creative Commons Attribution 3.0 Unported license

Pacific islanders face major losses from climate change

Megan Rowling in AlertNet: The livelihoods of some 10 million people in Pacific island communities are increasingly vulnerable to climate change, which poses "unprecedented challenges" to the region's economies and environment, a U.N.-backed report said on Friday.

Incomes - in many cases already low - are at risk from sea-level rise, tropical cyclones, floods and drought, as well as pressures linked to over-fishing and coastal development, said the report from the United Nations Environment Programme (UNEP) and the Pacific Regional Environment Programme.

Low-lying islands in the Pacific Ocean could face projected losses of up to 18 percent of gross domestic product due to climate change, UNEP added. “This report presents concrete evidence that food, freshwater and the livelihoods of Pacific islanders are under threat," UNEP Executive Director Achim Steiner said in a statement.

Other challenges include population increases, a reliance on imported food and commodities, a growing waste problem and invasive species - pressures that are being exacerbated by climate change and more frequent extreme weather events, said the report....

Enderbury Island, in Kiribati, shot by NASA

Weighing costs and benefits--a Carbon Based original

In deciding whether to undertake large projects, most managers and policymakers begin with a cost-benefit analysis, or CBA.  The advantage of CBA is its comparative simplicity. The choice with the largest net gains is the one we should select. This method shows a way forward using straightforward assumptions.

Unfortunately, when the first step in an important assessment is a CBA, policymakers have already closed off major alternatives, usually the ones that involve non-economic values.  And in a changing climate, a naive use of CBA creates a strong bias against, for example, cutting greenhouse gas emissions. 

Most economic theory struggles to explicitly addressing environmental goods and ills, which are not so readily translated into costs.  In fact, global warming is a market failure, perhaps the most significant market failure of all.

Most CBA users assume that the environment will remain stable over the life of the endeavor.  Yet climate change jeopardizes that stability. When farm productivity dropped because of environmental degradation during the Dust Bowl, recovery took decades.  A growing frequency of coastal property being inundated and disrupted by storm surges can dramatically alter the environmental picture --and therefore the economic outlook. But economists rarely call attention to these issues.

Environmental goods and ecosystem services are not readily quantified, and thus easy to take for granted in a business-dominated world. Insurance is one business mechanism that quantifies natural disaster costs to some degree, but the point of view is pretty limited and stylized. It's a distorted lens for getting the whole picture of climate change.

Risk is a blind spot for CBA, too. Even a mainstream economist such as Martin Weitzman notes that low probability but high impact scenarios tend to disappear from conventional CBA.  The destruction from Hurricane Sandy is a recent instance. Everyone knew that a hurricane hitting New Jersey and New York had a serious potential for tremendous losses. But long decades between storms lulled everyone, economists included, into postponing decisive action.  This is true even though the Bloomberg administration has actually done more than nearly any other American city. Sandy has shown how inadequate this effort was.

A more fundamental drawback is philosophical.  Cost-benefit analysis embodies norms that persistently steer us toward short-term ventures, consumption, and individualist standards -- the prevailing ideology of our era. The utilitarian bias of economists lead to scant regard to matters of morality, rights and justice. Personal relationships count for little, as does art, and even nature itself except where some natural feature has an obvious dollar equivalent.

In utilitarian style, CBA reduces values to mere preferences, which have to compete with a long list of stakeholder desires.  This group wants to preserve thriving wetlands, but other people want to buy houses that are "close to the land," and the alternatives compete in a CBA. If preserving ecosystem services imposes severe costs in the short term, then standard-issue property development will rule the day. It's left to environmentalists to object that, say, losing wetlands or species will result in overwhelming damage to property in a few years, or decades.

This raises another hitch for cost benefit analysis. CBA pays little attention to how the costs and benefits are distributed through time. By favoring the present generation, it allows those of us alive now to pass our knottiest difficulties on to our children and grandchildren. As I noted in an earlier post about the discount rate, economic theory struggles with how to coherently weigh the standing of later generations. Some economists openly declare that the present goods outweigh future utility -- which is why the future assigned a lower worth, using a discount rate. This may work well enough for financial investments, but it starts falling apart when ethics are involved.  And in climate change, ethics should be at the heart of the matter.

Dispensing with CBA altogether isn't possible, and it would be irresponsible to neglect the balance of costs and benefits of competing climate mitigation efforts. But when it comes to climate change, we have to be aware of the tool's limitations.

Discount rates and market failures: some original content

In grappling with climate change, we face a number of demanding decisions to make about land use, economic growth, and even basic justice. We must invest wisely, and our choices will have a dramatic impact on future generations. The stakes couldn't be higher.

In making these choices, policymakers assess the costs and benefits of a given measure over the life of a project, which in climate terms can be several generations, or even centuries. Because of the time frame, policymakers must gauge the present value of these costs and benefits. In other words, they use what's known as a social discount rate.  This measure looks like an interest rate, or the hurdle rates that corporations rely on when deciding to make business investments.

Many economists are drawn to the view that the social discount rate should track average market rates of return. A proper investment has a discount rate of five or six percent or more.   So the economically minded look for a six percent return on any climate change investments. 

A shaky assumption lies hidden in this point of view.  First of all, it means that the well-being of later generations matters less than economic growth right now.  The justification for this is the faith that later generations will benefit of years of economic development, to which investments like ours will make a strong contribution.

The social discount rate you choose is not a trivial decision. It can dramatically change the assessment of a given project, whether it's restoring wetlands or building flood barriers.

At five or six percent, a centuries-long issue like climate change is not worth much investment at all.  Positive discount rates have a magical effect on the costs of climate change -- they are minimized over short time periods, and they all but disappear over a century or two. Economic growth will take care of the problem.  Besides, an investor could make more money by buying a company and stripping its assets rather than investing in climate-friendly projects. 

Economists who study climate change disagree sharply about the social discount rate to use, with William Nordhaus arguing for a 5.5 percent rate, and Nicholas Stern insisting that a rate larger than 1.4 percent is, in fact, immoral. Stern even suggests that for ethical reasons, we should use a zero discount rate.

I side with Stern. When economists discuss the issue, the ethical dimensions are a major blind spot.   Climate change is also an ethical issue, not merely an economic one. The ethical reason for a zero discount rate -- otherwise we are reducing the standing and value of future generations.  In a moral discussion, all the participants should be on an equal or at least comparable footing.  Generations to come have a very strong stake in what we do today and ethically they must be taken into account.

Even more significant, climate change results from a broad, systemic market failure.  Without strong regulatory intervention, markets have no incentive of addressing externalities like pollution, greenhouse gas emissions, and the like.  We have little reason to believe that markets alone are going to solve the problems that unfettered markets have created.

Most economists are all too eager to minimize or eliminate the ethical dimensions to any discussion of climate change.  In doing so, they rely a psychological blind spot called hyperbolic discounting, which results when we dramatically overvalue present rewards over future rewards. It leads to short-term thinking run amok and unwillingness to plan for the long term.  Future generations get no say at all and have no standing when hyperbolic discounting is in force.

Since economists are inveterate hyperbolic discounters and often heedless of market failures, we should weigh their advice without much enthusiam.

Brooklyn Bridge with Freedom Tower and 8 Spruce Street in the background, New York, United States. A great shot by Kadellar, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Climate change to cost USD 26.9 billion, says expert

Benson Nyagesiba in the Star (Kenya): An environmental expert yesterday said that climate change will cost Kenya Sh2.3 trillion [about $26.9 billion] if measures to curb changes in weather patterns are not put in place. Alexander Alusa an environment adviser in the PM’s office said the weather changes are a challenge to the realising Vision 2030. “Climate change is a challenge because it affects the development of the country in the socio-economic sphere," said Alusa. That is why we must ensure we are in control of the weather."

Speaking in Kisii county at workshop in Climate Change, he said the PM's office has been holding public debates on climate change to get wananchi's views.

"The meeting are organised to give people an opportunity to say what they know about climate change,” Alusa said. During the hearing, parliament was asked to pass the Climate Change Authority Bill-2012 authored by Emuhaya MP Wilbur Ottichillo before it is dissolved.

The Bill will provide a framework for mitigating and adapting to the effects of climate change on various sectors of the economy. Speaking during the closure of the hearings, Assistant Minister in the PMs Office John Mbadi asked presidential aspirants to give climate change priority in their campaigns like in America.

Mbadi noted that no single candidate has taken concern over the same saying that climate change will consume three percent of the country’s GDP. “I am urging presidential candidates to prioritize climate change in their campaigns because this is a big concern to the country’s development,” Mbadi said....