Current Faculty Research:
The Bush Energy Policy
Cutler J. Cleveland and Robert K. Kaufmann
Like his four predecessors, President Bush has identified dependence on imported oil as an urgent energy, economic, and national security concern. To close the 'oil supply gap' the President promotes the development of domestic resources of oil and natural gas. Will this policy succeed? This project assesses the economic, energy security and environmental issues surrounding the Bush Energy plan. Download a draft copy here.
The Assessment of U.S. Oil and Gas Supplies
Cutler Cleveland and Robert Kaufmann
There are few issues more important and more hotly debated than the future supply of oil and natural gas. Our research has sought to identify the economic, geological, engineering and institutional forces that determined the historic pattern of petroleum discovery and production in the U.S., and then use that information to forecast future supply. Much of this work uses time series econometric models to quantify these relationships. Our results clearly show that (i) depletion effects now dominate technology effects in the discovery and production stages; (ii) models that rely exclusively on physical or economic driving forces have poorer explanatory power than those that integrate the effects of such forces, and (iii) policies that aim to subsidize or otherwise stimulate oil production in the U.S. will fail to do so in any appreciable way, and in doing so will damage the economy and the environment. A synthesis of this work is available at our web site: www.oilanalytics.org.
The Determinants of the Intensity of Use of Metals in the U.S. Economy, 1900-1997
Cutler Cleveland and Robert Kaufmann
Dematerialization refers to the absolute or relative reduction in the quantity of materials used and/or the quantity of waste generated in the production of a unit of economic output. A common indicator is the intensity of material use, which is the quantity of material used per unit of economic output. There has been a steady stream of research that suggests that the US economy has dematerialized. Many attribute this to a "natural" or "evolutionary" process driven by the maturation of economies or rising incomes. The apparent dematerialization leads some to hypothesize that the human economy can decouple itself from energy and material inputs by a factor of ten. We are testing this hypothesis for metal use in the U.S. We have constructed a database on metal consumption measure din physical units and using a Divisia index. We are using time series econometrics to determine what factors explain the quantity of metal used to produce a unit of GDP in the U.S. economy. Our goal is to identify the relative importance of driving forces such as income, metal prices, and shifts in the size of the manufacturing sectors of the economy.
Resource Depletion with Time-Inconsistent Preferences
Anthony Patt and Cutler Cleveland
Until now, economic models of resource depletion have assumed that agents discount future profits exponentially. Exponential discounting lends analytic tractability and fulfills fundamental axioms of rationality, but may not represent actual human behavior. Recent intertemporal decision-making models based on psychological experiments explain many observed phenomena that fundamentally contradict the predictions of the exponential model. One such class of models is hyperbolic discounting: the application of high discount rates to events occurring soon, and lower rates to events occurring further in the future. In this research we will examine whether hyperbolic discounting models are a better predictor of agents' depletion decisions. We plan to build an analytic model of resource depletion, incorporating time-inconsistent preferences, and test it against price and extraction quantity paths for several non-renewable resources. In addition, we will examine the implications of our results, that time-inconsistent agents deplete resources too fast, for developing countries relying on natural resources to kick-start economic growth.
The Encyclopedia of Energy
Cutler Cleveland, Editor-in-Chief
Associate Editors: Amory Lovins, Margaret Slade, Rajendra Pachauri, Vaclav
Smil, Robert Costanza, Jose Goldemberg , Robert Ayres, Robert Kaufmann, Mohan
Munasinghe and Lee Schipper.
Advances in our understanding of energy have catalyzed unparalleled social and technological transformations. However, there exists no authoritative reference providing an encyclopedic treatment of energy. This premise is the motivation for developing the Academic Press Encyclopedia of Energy. This scholarly endeavor will be designed as a comprehensive yet accessible reference; it will elucidate many of the transdisciplinary aspects of energy and illuminate energy's central role in society. Energy is designed to appeal to a variety of audiences including students, scholars and professionals in colleges, universities and other institutions of higher education; the libraries of non-governmental organizations, government agencies, and other consultants and researchers involved with energy, environmental, and public policy issues. Energy will follow in the path of Academic Press's award-winning Reference Series http://www.apnet.com/reference.
Current Research
My research in global climate change includes topics such as is climate changing and how will changes in climate affect human well-being. I use recent advances in time series techniques to attribute changes in global temperature to human activity, validate deterministic climate models, and identify the mechanisms responsible for the inability to balance the global carbon cycle (the so-called ‘missing carbon’ problem). I examine the effect of climate change on US agriculture by using artificial neural nets to downscale GCM forecasts and use this information to simulate hybrid yield models that integrate the physical and social determinants of crop yield.
Ecological economics seeks to understand the way in which natural environments contribute to human well-being and limits. To focus on these issues, I have developed theoretical models that quantify the effects of environmental degradation and empirical models of the relation between economic activity and the use of environmental goods and services. My investigations of the so-called ‘Environmental Kuznets Curve’ indicate that the relation between economic activity and the atmospheric concentration of sulfur dioxide is much more complex than the inverted U-shaped relation used by previous analysis.
My research on the link between energy use and economic activity focuses on the engineering and economic determinants of energy use. Analysis indicates that changes in the types of fuels used are among the most important determinants of the quantity of energy used to produce a unit of economic activity, both historically within nations and among nations at any point in time. Other factors that I have investigated include the asymmetric effects of energy prices, expectations about energy prices, and changes in the types of goods and services produced and consumed. Together, these results imply that the cost of reducing energy use will be higher than most analysts anticipate and that future rates of carbon emissions will be greater than most analysts anticipate.
My research also uses satellite images to analyze land use and land cover change. Over the last few years, I have analyzed land use change in the Pearl River Delta of China. To do so, I have developed ways of using econometric techniques to analyze satellite images. I also have estimated random coefficient models that quantify the economic, demographic, and technical factors that influence the rate at which agricultural and natural lands are converted to urban uses. I combine these models with Project LINK to forecast future rates of land use change under different scenarios for economic development in China. I also have become interested in using satellite images to quantify the effects of changes in temperature and precipitation on biological activity in natural ecosystems. These efforts are aimed at identifying sinks that will allow us to balance the global carbon cycle.
Understanding the drivers of change in U.S. energy intensity
Concerns over climate change mitigation policies and their impact on future energy use have revived interest in explaining the reduction in the energy-intensity of the U.S. economy over the last 40 years. This research identifies the contribution of energy-saving technological progress to this decline by decomposing changes in the aggregate energy-GDP ratio into shifts in the industrial composition of output and adjustments in the energy demand of individual industries. Although structural change offsets a rise in sectoral energy intensities from 1960 until the mid-1970s, after 1980 the change in the industrial mix has little impact and the average sectoral energy intensity experiences decline. An econometric model of production is then used to allocate the within-industry changes in energy intensity among four key drivers of change: substitution of variable inputs, shifts in the composition of capital and technological progress. Technological change is found to be the largest contributor to the fall in energy intensity, but its effect is largely offset by increased demand for energy due to growth of stocks of energy-using capital.
Greenhouse gas emission emission trading under uncertainty: the performance of absolute and relative targets
Cap-and-trade systems limit emissions to some pre-specified absolute quantity. Intensity-based caps, that limit emissions to some pre-specified fraction of economic output, have gained increasing attention, especially within the context of greenhouse gas (GHG) emissions trading. This research elucidates the theoretical properties of these two methods of setting limits on GHG emissions in a world where future emissions and GDP are not known with certainty, but empirically exhibit strongly positive covariance. The results show that the two methods have identical effects in a world where future emissions and economic output (i.e., GDP) are known with certainty. The methods outcomes for marginal costs, abatement, emissions and welfare diverge only because of the variance of actual future emissions and GDP relative to forecast expectations of these quantities. Ongoing work seeks to elucidate the effects of fluctuations in expected GDP on the price and quantity of emission trades under each type of cap in a GHG emissions trading market.
Use of seasonal climate forecasts for small-holder agriculture
This research examines the potential for developing country subsistence farmers, among the most vulnerable of people to the effects of climate change, to utilize seasonal climate forecasts in order to improve their harvests. The project focuses on the potential of participatory communication practices to overcome many of the commonly observed constraints that scientists have identified as limiting forecast use, including lack of trust in the information, lack of understanding, and inability to apply the information to decisions. In so doing, the project can more closely examine whether other constraints, such as limited financial resources, prevent farmers from using information in a marginal way. The project works with over 500 farmers in four villages in Zimbabwe. The project has resulted in numerous peer reviewed papers, reports, and workshops; the results should improve not only forecast communication practices, but also other efforts to promote adaptation to climate change.
Uncertainty communication for climate change policy
This project examines the psychological and behavioral factors influencing people’s interpretation of scientific information, most importantly when there exists significant uncertainty. By using controlled surveys, among university students, policy makers, and experts, the researchers examine the potential for biased interpretation of science, and the consequences on climate change policy-making. The project has led to two peer reviewed papers, and is working with scientists in the Intergovernmental Panel on Climate Change and the European Union to improve current communication practices for uncertainty.
Climate change vulnerability assessment for policy making
This project examines the congruence between current efforts to conceptualize and assess vulnerability to climate change, and the need for such assessment by policy makers. Using case studies of vulnerability assessment in Europe, the United States, and developing countries, the project is attempting to provide a better link between knowledge and action in this area. The project has produced one peer-reviewed paper, and is currently developing an edited book.
