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Modelling the impacts of policy on entry into organic farming: Evidence from Danish–UK comparisons, 1989–2007

Link: http://dx.doi.org/10.1016/j.landusepol.2010.09.001

Abstract: This paper analyses organic farming entry decisions using a piece-wise linear depiction of policy. Our goal is to ascertain, from the available but limited information, whether Danish and UK policy measures toward organic agriculture have affected participation. Despite considerable interest in the growth of organic farming there has been little systematic analysis of it, although it is commonly believed that enhanced income levels have played a part. Whilst analyses of organic farming policy have provided extensive reviews of instruments applied, generally speaking, the spirit of those enquiries takes as datum that organic policies have had the desired impacts. Yet such conjectures remain mostly untested. Hence, there is a need to examine systematically if there exist relationships between the introduction of organic farming policies and the growth of organic farming, and whether particular policy measures are more effective than others. Here, we take a first step in this endeavor by undertaking an econometric analysis of the relationship between 14 organic farming policy measures and participation rates in Denmark and the UK during 1989–2007. Using two response variables – the numbers of farmers converted to organic production and the total land area under organic practice – we implement a simple, Bayesian methodology and evaluate the stepwise-linear impacts of policy. Extensions for future work are discussed. Six policy measures in the two study countries were found to be significant influences on participation, five of them direct supply-side instruments. For the UK, all of the policies are annual subsidies for organic farmers once conversion was complete. For Denmark, the policies are the introduction of organic subsidies for non-dairy farms, the extension of subsidies beyond 1997 and support for the costs of marketing services.

by Carsten Daugbjerg 1, Richard Tranter 2, Caroline Hattam 3 and Garth Holloway 4
1. Department of Political Science, University of Aarhus, Denmark and Research School of Social Sciences, Australian National University, Australia
2. Centre for Agricultural Strategy, University of Reading, UK
3. Plymouth Marine Laboratory, Plymouth, UK
4. Department of Agricultural and Food Economics, University of Reading, PO Box 237, Earley Gate, Reading RG6 6AR, UK
Land Use Policy via Elsevier Science Direct www.ScienceDirect.com
Volume 28, Issue 2; April, 2011; Pages 413-422

U.S. wind energy industry finishes 2010 with half the installations of 2009, activity up in 2011, now cost-competitive with natural gas - Industry weathers latest boom-bust cycle as utilities move to lock in more wind power at favorable long-term rates

Link: http://www.awea.org/rn_release_01-24-11.cfm

America's wind industry built 5,115 megawatts of wind power last year, barely half of 2009's record pace, but entered 2011 with over 5,600 megawatts currently under construction - and with wind cost-competitive with natural gas for new electric generation, utilities are moving to lock in favorable rates.

"Wind power is a great deal right now in many areas of the country," said Denise Bode, CEO of the American Wind Energy Association (AWEA). "However, our industry continues to endure a boom-bust cycle because of the lack of long-term, predictable federal policies, in contrast to the permanent entitlements that fossil fuels have enjoyed for 90 years or more.

"Now that we're competing with natural gas on cost, we need consistent federal policies to ensure we have a diverse portfolio of energy sources in this country, and don't become overreliant on one source or another."

AWEA reported today that 3,195 megawatts (MW) of wind-powered electric generating capacity came online in the fourth quarter of 2010. That performance was below the 4,113 MW installed in the same period in 2009, but a leap from the third quarter of 2010, when only 670 MW were installed. The U.S. finished the year with a total of 5,115 MW of new wind power.

Buoyed by a one-year extension of the 1603 Investment Tax Credit for renewable energy in the final days of the 111th Congress, the industry entered the new year with over 5,600 MW of electric power currently under construction, well above the same time a year earlier. Further projects are expected to start up in time to meet the new construction deadline for the tax credit, now set to expire at the end of 2011. The industry is likely to finish 2011 ahead of 2010 numbers, according to Elizabeth Salerno, AWEA Director of Industry Data & Analysis.

"Wind's costs have dropped over the past two years, with power purchase agreements being signed in the range of 5 to 6 cents per kilowatt-hour recently." Salerno said. "With uncertainty around natural gas and power prices as the economy recovers, wind's long-term price stability is even more valued. We expect that utilities will move to lock in more wind contracts, given the cost-competitive nature of wind in today's market."

Total U.S. wind capacity now stands at 40,180 MW, an increase in capacity of 15% over the start of 2010, AWEA reported today. For the first time, U.S. capacity fell second to China's; China now has 41,800 MW in operation, an increase of 62% in capacity over a year ago, according to a Jan. 13 report from the Chinese Renewable Energy Industries Association.

With uncertainty over national policies still holding back the U.S. industry, state targets for renewable energy continue to drive wind installations in many areas of the country. "We'll continue to work for a strong federal energy policy that drives the deployment of renewable energy technologies in the 112th Congress," Bode said, "but we'll also be defending and improving on state renewable targets, as well as promoting other sources of demand - such as more distributed and community wind projects, and corporate purchasing under the new WindMade trustmark."

The top five states for cumulative wind energy capacity at the close of 2010 all have such state targets:
Texas: 10,085 MW
Iowa: 3,675
California: 3,177
Minnesota: 2,192
Washington: 2,105

Texas, the leading wind power state in America for several years running, achieved a major milestone by surging past the 10,000-megawatt mark for total installations, a quarter of all wind capacity in the U.S., with the addition of 680 MW in 2010. Known as the hub of the oil-and-gas industry, Texas achieved the mark thanks to aggressive pursuit of renewable energy and a renewable electricity standard passed in 1999 and strengthened in 2005. On average, wind now generates 7.8% of the electricity in the Electric Reliability Council of Texas (ERCOT) which covers most of the state, peaking as high as 25%.

Other states active in pursuing targets for renewable energy last year were Illinois (498 MW added), California (455 MW), South Dakota (396), and Minnesota (396 MW). Five more states, which generally began tapping their inexhaustible wind resources more recently than the leaders, showed growth rates above 100%. The list starts with Delaware and Maryland, which added their first utility-scale wind turbines in 2010:
Delaware & Maryland: First utility-scale installation
Idaho: +140%
South Dakota: +126%
Arizona: +103%

With the addition of Delaware and Maryland, 38 states now have utility-scale wind projects, and 14 of those have now installed more than 1,000 MW of wind power.

AWEA's Fourth Quarter Market Report for 2010 is available at www.awea.org/la_pubs_reports.cfm.

Six Distributional Effects of Environmental Policy

Link: http://papers.nber.org/papers/w16703

Abstract: While prior literature has identified various effects of environmental policy, this note uses the example of a proposed carbon permit system to illustrate and discuss six different types of distributional effects: (1) higher prices of carbon-intensive products, (2) changes in relative returns to factors like labor, capital, and resources, (3) allocation of scarcity rents from a restricted number of permits, (4) distribution of the benefits from improvements in environmental quality, (5) temporary effects during the transition, and (6) capitalization of all those effects into prices of land, corporate stock, or house values. The note also discusses whether all six effects could be regressive, that is, whether carbon policy could place disproportionate burden on the poor.
...
The effects of climate policy on multiple output prices are calculated in CGE (Computable General Equilibrium) models by Elliott et al (2010) and by Rausch et al (2010), but a simpler analytical general equilibrium model of Fullerton and Heutel (2010) aggregates carbon-intensive goods and finds that an increase in the CO2 price from $15/ton to $30/ton would raise that output price by 7.2%. They then use data on spending and incomes of thousands of households in the Consumer Expenditure Survey (CEX) to find that the ratio of burden to income rises monotonically across annual income deciles. The first eight deciles lose more than average, while the highest two income deciles lose less than average.
...
by Don Fullerton
National Bureau of Economic Research (NBER) www.NBER.org
NBER Working Paper No. 16703; Issued in January 2011
The full paper is currently available free of charge at:
http://www.cesifo-group.de/portal/pls/portal/docs/1/1201050.PDF

UC Davis study finds greenhouse gas emissions can hurt companies' stock value

Link: http://www.news.ucdavis.edu/search/news_detail.lasso?id=9741

How much greenhouse gas a company produces has a significant effect on the value of the company's stock, according to a new study by researchers at the University of California, Davis; University of California, Berkeley; and University of Otago in New Zealand.

The greater the carbon emissions, the lower a company's stock, all other factors being equal, the researchers found. The study was led by Paul Griffin, a professor in the UC Davis Graduate School of Management.

Griffin and his colleagues also discovered that markets respond almost immediately when a company reports an event that could affect global climate change, with stock values responding the same day as the disclosure.
...
The findings bolster the arguments of investor groups, environmental advocates and watchdog organizations that have been seeking greater disclosure of company actions that affect climate change.

Although the U.S. Securities and Exchange Commission does not require all companies to report greenhouse gas emissions, firms are bound by a rule that mandates disclosure of any information material to stock values. Today, about half of large U.S. firms report greenhouse gas emissions through the Carbon Disclosure Project, a British organization representing mostly institutional investors.

Griffin and colleagues David H. Lont of the University of Otago in New Zealand and Yuan Sun of the University of California, Berkeley, analyzed four years of data (2006-09) on firms listed in the Standard & Poor's 500 and five years of data (2005-09) for the top 200 publicly traded firms in Canada.

The researchers developed mathematical models to analyze the data. They found the link between stock values and greenhouse gas emissions to hold true in most industries, although the correlation was strongest for energy companies and utilities.

“After controlling for normal valuation factors like assets and earnings, we found the value of stocks to be a function of greenhouse gas emissions,” Griffin says.

Many firms file formal notices with the SEC and issue press releases following an event that could affect climate change. The researchers identified approximately 1,400 such reported events by firms in the study.

The researchers then tracked movements of stocks on days around when these events were reported. “We see a response on exactly the day you would expect to see it, and that is when the information becomes public,” Griffin says.

Why do investors care about greenhouse gas emissions? Griffin says markets are always looking forward, and in this case they appear to be anticipating a time when companies responsible for climate change will face increased costs for mitigation, regulation and taxes.

“They are examining the economic impact of what a company is doing on climate change, and they are assessing whether that is positive or negative for the company's value,” Griffin says.

Download the full study at: http://ssrn.com/abstract=1735555.

University of California Davis UC Davis
Press Release dated January 24, 2011