Essays in Ecological Economics
Creators: name: Distefano, Tiziano
Publisher: name: IMT Alti Studi Lucca
Year: 2015
Subjects: HB Economic Theory

description: Ecological Economics (EE) is a novel, wide and heterogeneous branch of research which aims at studying the relationships between Ecological and Economic Systems, which are composed of large number of entities (state variables or stocks), that interact through the flows of matter, energy, and information passing through the systems' boundaries. The two systems are strictly interwoven and each one have an impact on the other, i.e. the exploitation of natural resources for productive purposes and the potential economic losses due to environmental disasters (e.g. climate change). The current dissertation provides a set of both theoretical and empirical studies to tackle the problem of natural resource scarcity (e.g. water), climate change, economic growth, international agreements and environmental consciousness with different methodologies, in line with the purposes of EE. The dissertation is composed by two main blocks: the first one based on empirical investigations of water resource exploitation and the other based on theoretical studies. The first block (chapters 2 and 3) employs a sector-level approach to investigate, at Global level, the main drivers of (Blue) water exploitation and the vulnerability of inter-sectoral linkages to external shocks (chapter 2), and the extent to which OECD GDP growth forecasts are sustainable under the current water resource availability and future climate change (chapter 3). The second block (chapter 4) describes a novel theoretical framework to analyse the International Environmental Agreements, combining a static 2x2 game (macro-level) with an Evolutionary Game (micro-level). The Appendix A provides the Supplementary Materials in which are explained in depth the mathematical details of the models employed in the Chapters 2 and 3. Moreover, it has been introduced a brief survey, part of a work in progress, that touches some of the basic principles, epistemological assumptions and methodological issues underpinning Ecological Economics. Chapter 2 discusses the empirical distribution of Blue virtual water trade and it assesses the vulnerability of inter-sectoral trade by integrating the Input-Output tables with Network Theory. This paper applies the Global Multi-Regional Input-Output (GMRIO) model to quantify the interdependencies of different sectors, within the global economy, and to determine the overall Blue water consumption of each country. This procedure allows the measurement of Virtual Water Trade (VWT), that is the volume of water embedded in traded goods. Firstly, I present the results from the Structural Decomposition Analysis (SDA) at different level of aggregation: spatial and sectoral. This procedure allows to identify and quantify the impact of the main drivers of Blue water use: technological development, international trade, evolution of production functions, population growth and changes in the product mix of final demand. SDA is integrated with the analysis of the topology of the inter-sectoral Blue VWT in order to assess the vulnerability of the system to external shocks. This paper offers a novel framework because it combines two different, but analogous, methodologies that allow to set up a broad framework in which assessing the effect of the key factors in water exploitation and the resilience of the system to (micro-level) shocks. All in all, SDA showed a substantial contribution to reducing water demand exerted by the composition of final demand and by improvements in the water efficiency of production, while demographic and economic growth and changes in the intermediate input mix has more than compensated such reduction. Network theory extends the information provided by the IO assessment, confirming that the system is particularly exposed to the propagation of local (supply-side) shocks due to 'cascade effects'. The 'duality' of trade is determined by the apparent minor role played, evidenced by the SDA, coupled with the potential risks related to the propagation of shocks in water supply. The main policy implication of these findings is that a cross-country coordination of water management policies is needed to increase the resilience of the water supply system to negative shocks to some crucial sector, that would otherwise propagate to a large number of countries. Chapter 3 integrates measures of social water scarcity and ter physical renewable water constraints, in order to structure a consistent set of scenarios under which evaluate the likely economic impacts caused by future water scarcity, the technological development needed to follow a sustainable growth and the role of VW trade in providing an extra-amount of (virtual) water per capita. The problem of quantitatively evaluate water resources vulnerability derives from the fact that is also used, both directly and indirectly, in production processes across many different sectors of the economy, through supply chain. This is simulated with an assessment of very long-run implications (2100), using a Dynamic Multi-Regional Input-Output (D-MRIO) model. I simulate the joint impact of climate change, economic and population growth, as provided by the Intergovernmental Panel on Climate Change (IPCC), under four alternative scenarios. In order to overcome the limitations of the Falkenmark indicator, I assess both the direct water footprint of national consumption and total water footprint that also allows for VW water trade between different regions of the world. Results suggest that under OECD GDP growth rates, there should be an over-exploitation of available freshwater resources (Wa) in almost every country across all scenarios. It is shown that, for most countries, water-stress is mostly affected by socio-economic variables rather than directly from climate change. The comparison of the results using alternative, internally consistent, climate change scenarios is essential to guide future environmental policy decisions, both at national and international levels, to achieve sustainable and equitable water management strategies. Chapter 4 contributes to explain the observation of two facts at odds: starting from the meeting held in Stockholm in 1972 till the last one arranged in Lima on December 2014, the number of signatories of international environmental agreements (IEA) has grown in time. Meanwhile, the aggregate global level of greenhouse gas emissions is increasing at exponential rate worldwide. I propose a novel multi-scale framework, composed by two tied games, to show under which conditions a country is able to fulfil the IEA: Game 1 is an Evolutionary Game that models the economic structure of 'isolated' economies, where the interaction of households and firms strategies determine the level of greenhouse gas discharge. Game 2 deals with the IEA with a 2 x 2 static one-shot game, in which two asymmetric nations bargain on the maximum level of emissions. Countries might have different environmental performances based on their economic structure, without the need to impose any 'free-riding' behaviour. Consumer's environmental consciousness (micro level) together with global income (and technological) inequality (macro level), are found to be the key variables towards the green transition path. IEA alone appears to be a weak incentive, unable to stimulate a green transition if not paired with local action and high level of environmental awareness among consumers. Due to the complexity of the game, not any result can be showed analytically, therefore I run four simulations. The current approach is able to offer a multi-scale level of analysis necessary to deal with the complex issues at stake, that is climate change and global/local actions. Appendix A This chapter is a brief methodological note on the models employed in Chapter 2 and 3, in particular it offers the detailed mathematical system of equations at the base of the Structural Decomposition Analysis (Chapter 2), the algorithm with which I computed the sustainable rate of technological progress (Chapter 3) and an extension of Chapter 3 based on the computation of the potential economic losses in case of un-sustainable exploitation of water resources. Finally, I provide a brief overview of the epistemological and methodological foundations of Ecological Economics. I pass through some key concepts (i.e. entropy law, incommensurability, complexity and irreversibility) in order to frame the strengths and the limits of this novel, wide and heterogeneous branch of research. Meanwhile, the aggregate global level of greenhouse gas emissions is increasing at exponential rate worldwide. I propose a novel multi-scale framework, composed by two tied games, to show under which conditions a country is able to fulfil the IEA: Game 1 is an Evolutionary Game that models the economic structure of 'isolated' economies, where the interaction of households and firms' strategies determine the level of greenhouse gas discharge. Game 2 deals with the IEA with a 2x2 static one-shot game, in which two asymmetric nations bargain on the maximum level of emissions. Countries might have different environmental performances based on their economic structure, without the need to impose any 'free-riding' behaviour. Consumer's environmental consciousness (micro level) together with global income (and technological) inequality (macro level), are found to be the key variables towards the green transition path. IEA alone appears to be a weak incentive, unable to stimulate a green transition if not paired with local action and high level of environmental awareness among consumers. Due to the complexity of the game, not any result can be showed analytically, therefore I run four simulations. The current approach is able to offer a multi-scale level of analysis necessary to deal with the complex issues at stake, that is climate change and global/local actions. Appendix A This chapter is a brief methodological note on the models employed in Chapter 2 and 3, in particular it offers the detailed mathematical system of equations at the base of the Structural Decomposition Analysis (Chapter 2), the algorithm with which I computed the sustainable rate of technological progress (Chapter 3) and an extension of Chapter 3 based on the computation of the potential economic losses in case of un-sustainable exploitation of water resources. Finally, I provide a brief overview of the epistemological and methodological foundations of Ecological Economics. I pass through some key concepts (i.e. entropy law, incommensurability, complexity and irreversibility) in order to frame the strengths and the limits of this novel, wide and heterogeneous branch of research.