Manandnature

01/01/2014 -

31/12/2027

Horizon 2020, European Research Council (ERC)

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MANANDNATURE creates a body of research on natural resource management and energy use in developing countries with a focus on forest and ocean conservation, aiming (i) to bring novel, applied micro techniques from development economics to the study of environmental and energy economics, (ii) to harness new data collection technologies using satellites and randomized control trials, (iii) to pioneer the use of political economy approaches to understand the gap between de jure and de facto policies, and (iv) to innovate on policy design by embedding researchers

Main objectives

The growth required to lift a billion people out of extreme poverty will require large increases in natural resource extraction and energy consumption. The negative externalities this growth creates – through degradation of forests and oceans, pollution and climate change – will affect us all. This is a proposal to create a new body of research on natural resource management and energy use in developing countries. It is distinctive for four reasons. First, it brings novel, applied micro techniques from development economics to the study of environmental and energy economics. Second, it harnesses new data collection technologies using satellites and randomized control trials. Third, we pioneer the use of political economy approaches to understand the gap between de jure and de facto policies. Finally, we innovate on policy design by embedding researchers with policy partners to co-generate research and ensure that findings scale directly into policies. On natural resources, we propose three projects which use newly-available satellite data. The first examines regression discontinuities along the Brazilian border to understand why deforestation has slowed in the Brazilian Amazon but not in neighbouring countries. The second employs structural modeling to look at how economic and political factors influence the ignition and spread of forest fires in Indonesia. The third looks at whether regulating access to parts of the ocean can enhance its productivity and ability to absorb carbon. On energy, we propose three collaborative projects which employ randomized trials to look at how to improve access to energy. The first examines how to get consumers to pay for the electricity they use in contexts where theft, non-payment and mispricing of electricity are rife. The second estimates a demand curve for solar electricity to understand how solar may contribute to meeting rising energy demand. The third looks at impacts of grid expansion in a largely un-electrified country.

Main results

The four projects outlined above form the core of ERC Grant “Man and Nature in Developing Countries”. Work on these has sparked other projects over the past two and half years. Working with Clare Balboni, the first research manager of the ERC grant who in 2019 moved to an Assistant Professor position at MIT, and Joe Shapiro at the University of California, Berkeley, the PI Robin Burgess has started a new project on trade in trash. What has come to their attention was that an enormous amount of trade in recycled goods occurs between Europe, the US and developing countries. China has recently decided to ban much of this trade, a move that forms part of an increasingly popular narrative that developed countries should be forced to process their own waste instead of exporting it. Sending waste to developing countries could see it illegally enter the environment or be processed with higher pollution costs, for example due to weaker regulatory standards and enforcement. For these reasons, it is possible that banning trade in recycled materials is welfare improving at a global level, contradicting the traditional result in economics that trade makes both parties better off. It is this precise question that this interesting new project, which arose directly from the set of collaborations financed by the ERC, seeks to tackle. Another line of work, this time inspired by the ERC project on grid expansion in Myanmar, has been centred around the recognition that viewing electricity as a right might actually hinder access to electricity in a whole range of developing countries. When individuals fail to pay for electricity, it renders electricity distribution companies loss making and necessitates the rationing of electricity by the state. This leads to poor or patchy access for households and firms, with the universal 24-hour electricity that we are all used to in Europe being largely absent in the developing world. This realisation led the PI Robin Burgess to write up with co-authors Michael Greenstone and Anant Sudarshan from the University of Chicago and Nicholas Ryan from Yale University a paper titled “The Consequences of Treating Electricity as a Right”, which was published in the Journal of Economic Perspectives in Winter 2020. Another activity in the area of access to energy which has progressed beyond what was anticipated in the proposal has involved the movement of the team working on Myanmar to Pakistan, where a similar bundle of electrification issues also apply. The Government of Pakistan has made reform of the energy sector a key priority. Based on the work they were carrying out in Myanmar and India, the PI Robin Burgess and collaborator Michael Greenstone were invited to visit the Pakistan in February 2019 and met with the Minister of Energy, Minister of Finance and the Prime Minister’s Special Advisor on Energy Reforms. Since early 2019 we have had two full time economists embedded inside the Pakistan Ministry of Energy. Deeply integrated into the day-to-day operations of the government, our team on the ground has had numerous instances of policy impact that directly facilitate our growing research agenda in this engagement. One key area of focus is reforming the system of energy subsidies in the country as a means of improving its fiscal position. Savings in this area will also allow for subsidies to be better targeted than is the case today where the subsidies accrue mainly to richer households. The final unexpected activity which was not envisaged in the proposal is that the setting up of the ERC lab combined with the establishment of the LSE EEE programme has allowed Robin Burgess to begin teaching a new PhD course on environmental economics in the LSE Department of Economics. This is designed to attract PhD students to working in this important area of research. The response to this offering has been extremely promising. This may become an important additional means of getting a larger number of frontier economists in the world working on issues relating to environment and energy economics in the developing world.

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