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Discussion Paper

No. 2009-11 | January 22, 2009
Productive Base Sustainability under Climate Change: Theoretical Results and Empirical Evidence

Abstract

Climate change is one of the most urgent and severe problems on the international agenda and one of the basic factors that determine sustainability conditions. This paper attempts to reveal the connection between productive base sustainability for two large groups of countries, developed and developing, and the state of the environment, which is proxied by the stock of carbon dioxide (CO2) which is mostly responsible for the creation of the global warming phenomenon. Three different policy scenaria for the evolution of global CO2 emissions empirically confirm the strong association between the state of the environment and productive base sustainability, and provide the foundations for the formulation of sustainability policy.


Paper submitted to the special issue “Discounting the Long-Run Future and Sustainable Development”

JEL Classification

Q01

Cite As

Dimitra Vouvaki and Anastasios Xepapadeas (2009). Productive Base Sustainability under Climate Change: Theoretical Results and Empirical Evidence. Economics Discussion Papers, No 2009-11, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2009-11

Assessment



Comments and Questions


Anonymous - Review
January 23, 2009 - 12:46

Overall assessment
I am not the person to judge the analytical results. There are many ad hoc assumptions, however, without much justification.

The paper is presented as a paper about climate change. The model, on the other hand, has little to do with climate change. At two points, assumptions ...[more]

... are made that are in clear contrast to the empirical knowledge about climate change. At one crucial point, the write-up is so muddled that it is impossible to compare the current paper to previous papers. (See specific comments).

The authors do not attempt to compare their results to previous work. Indeed, they seem to be unaware that their conclusion (climate change is a problem of weak sustainability) is in sharp contrast to previous studies (Fankhauser, Mendelsohn, Nordhaus, Pearce, Tol) who conclude the economic impact of a century of climate change is comparable to a year or two of economic growth.

I cannot recommend publication of the paper in its current form. The authors can do one of two things. Either they present the paper as a theoretical paper and remove all references to climate change as well as the empirical part. Or they make sure that their empirics is reproducible and correct (to the extent that we know what that is), and compare the results to previous studies and explain if and why this paper deviates from the received wisdom.

Specific comments
Scenaria > scenarios (pls switch on your spell checker – this is not a referee’s job)

Footnote 3: Please cite academic papers rather than policy reports. You would find, by the way, that the academic literature does not support your alarmism.

Equation (pls add equation numbers): With a Cobb-Douglas production function, emissions are essential. There is no empirical support for this assumption (e.g., Edmonds, Richels, Weyant), but it does affect your results.

Equation (13) does not describe the carbon cycle (e.g., Maier-Reimer and Hasselmann, 1987).

Equations (10) and (11): The damage function is ad hoc and very different than the damage functions one would find in the literature on this subject (e.g., Fankhauser, Mendelsohn, Nordhaus, Tol). Warming is logarithmic in concentrations. Although damages are more than linear in warming, utility is again sublinear in damage. I therefore do not understand the assumption γ>1.

Table (pls add table number): β is not the marginal damage in the unnumbered equation above. What should I believe? Table 3a cannot be interpreted as it stands. Yet, your main results depend crucially on your assumptions about β.

I read Tvouvelekas et al., which uses Tol’s (2005) GLOBAL, MARGINAL, MONETARY estimates. If you are using marginal estimates, you assume linearity that is γ=1 (as you do) – but Tol’s linearity is in money and emissions, not in utility and concentrations. If you are using monetary estimates, how can you add them to utility as in Eq (10-11)? If you are using global estimates, how did you translate them to the national numbers in Table 3a? Clearly, you did not use just an inverse of per capita income in Table 3a. Tvouvelekas, the alleged source of Table 3a, does not have these numbers either.

Table 1: Please add descriptions for the symbols. Please revise the definition of significant digit.

Tvouvelekas et al. is FEEM 38.07


Anastasios Xepapadeas - Reply to Referee Report
February 23, 2009 - 17:16

see attached file


Anonymous - Response to reviews
March 02, 2009 - 13:12

1. As a referee, I worked under the assumption that another referee would look at the theoretical parts of the paper. I only looked at the empirical / applied parts of the paper, and they are not worth publishing as they stand. That does not imply, of course, that there ...[more]

... is no theoretical contribution. There may be, but I am not the one to judge that.

2. With regard to footnote 3, I respond to "your alarmism", which is based on the Stern Review (which was not peer-reviewed prior to publication, but was afterwards) and selective reading of the IPCC reports (which have their own problems).

3. Energy is an essential input. Fossil fuels and hence carbon dioxide emissions are not essential.

4. I did indeed not read all the papers that were cited. I did read one of the crucial citations (an earlier paper by the same authors), and found that it does not contain the information used in the current paper.

5. I did not comment on the utility function. I did note that your earlier paper (see 4) shifted units (from "dollar per tonne of carbon emitted" to "utils per tonne of ambient carbon") without properly adjusting the number.


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