Discounting the Benefits of Climate Change Policies Using Uncertain Rates

Evaluating environmental policies, such as the mitigation of greenhouse gases, frequently requires balancing near-term mitigation costs against long-term environmental benefits. Conventional approaches to valuing such investments hold interest rates constant, but the authors contend that there is a real degree of uncertainty in future interest rates. This leads to a higher valuation of future benefits relative to conventional methods that ignore interest rate uncertainty.

Discounting the distant future: How much do uncertain rates increase valuations?

We demonstrate that when the future path of the discount rate is uncertain and highly correlated, the distant future should be discounted at significantly lower rates than suggested by the current rate. We then use two centuries of US interest rate data to quantify this effect. Using both random walk and mean-reverting models, we compute the "certainty-equivalent rate" that summarizes the effect of uncertainty and measures the appropriate forward rate of discount in the future. Under the random walk model we find that the certainty-equivalent rate falls continuously from 4% to 2% after 100 years, 1% after 200 years, and 0.5% after 300 years. At horizons of 400 years, the discounted value increases by a factor of over 40,000 relative to conventional discounting. Applied to climate change mitigation, we find that incorporating discount rate uncertainty almost doubles the expected present value of mitigation benefits. © 2003 Elsevier Science (USA). All rights reserved.

Editor's choice Regional trade agreements and export competitiveness: the uncertain path of Nicaragua’s apparel exports under CAFTA

The Central American Free Trade Agreement (CAFTA) has been a mixed blessing for economic development. While exports to the US economy have increased, dependency may hinder economic growth if countries do not diversify or upgrade before temporary provisions expire. This article evaluates the impact of the temporary Tariff Preference Levels (TPLs) granted to Nicaragua under CAFTA and the consequences of TPL expiration. Using trade statistics, country- and firm-level data from Nicaragua’s National Free Zones Commission (CNZF) and data from field research, we estimate Nicaragua’s apparel sector will contract as much as 30–40% after TPLs expire. Our analysis underscores how rules of origin and firm nationality affect where and how companies do business, and in so doing, often constrain sustainable export growth.

Adaptive Mixture Modelling Metropolis Methods for Bayesian Analysis of Non-linear State-Space Models.

We describe a strategy for Markov chain Monte Carlo analysis of non-linear, non-Gaussian state-space models involving batch analysis for inference on dynamic, latent state variables and fixed model parameters. The key innovation is a Metropolis-Hastings method for the time series of state variables based on sequential approximation of filtering and smoothing densities using normal mixtures. These mixtures are propagated through the non-linearities using an accurate, local mixture approximation method, and we use a regenerating procedure to deal with potential degeneracy of mixture components. This provides accurate, direct approximations to sequential filtering and retrospective smoothing distributions, and hence a useful construction of global Metropolis proposal distributions for simulation of posteriors for the set of states. This analysis is embedded within a Gibbs sampler to include uncertain fixed parameters. We give an example motivated by an application in systems biology. Supplemental materials provide an example based on a stochastic volatility model as well as MATLAB code.

Physical and economic potential of geological CO2 storage in saline aquifers.

Carbon sequestration in sandstone saline reservoirs holds great potential for mitigating climate change, but its storage potential and cost per ton of avoided CO2 emissions are uncertain. We develop a general model to determine the maximum theoretical constraints on both storage potential and injection rate and use it to characterize the economic viability of geosequestration in sandstone saline aquifers. When applied to a representative set of aquifer characteristics, the model yields results that compare favorably with pilot projects currently underway. Over a range of reservoir properties, maximum effective storage peaks at an optimal depth of 1600 m, at which point 0.18-0.31 metric tons can be stored per cubic meter of bulk volume of reservoir. Maximum modeled injection rates predict minima for storage costs in a typical basin in the range of $2-7/ ton CO2 (2005 U.S.$) depending on depth and basin characteristics in our base-case scenario. Because the properties of natural reservoirs in the United States vary substantially, storage costs could in some cases be lower or higher by orders of magnitude. We conclude that available geosequestration capacity exhibits a wide range of technological and economic attractiveness. Like traditional projects in the extractive industries, geosequestration capacity should be exploited starting with the low-cost storage options first then moving gradually up the supply curve.

Bacteria localization and chorion thinning among preterm premature rupture of membranes.

OBJECTIVE: Bacterial colonization of the fetal membranes and its role in pathogenesis of membrane rupture is poorly understood. Prior retrospective work revealed chorion layer thinning in preterm premature rupture of membranes (PPROM) subjects. Our objective was to prospectively examine fetal membrane chorion thinning and to correlate to bacterial presence in PPROM, preterm, and term subjects. STUDY DESIGN: Paired membrane samples (membrane rupture and membrane distant) were prospectively collected from: PPROM = 14, preterm labor (PTL = 8), preterm no labor (PTNL = 8), term labor (TL = 10), and term no labor (TNL = 8), subjects. Sections were probed with cytokeratin to identify fetal trophoblast layer of the chorion using immunohistochemistry. Fluorescence in situ hybridization was performed using broad range 16 s ribosomal RNA probe. Images were evaluated, chorion and choriodecidua were measured, and bacterial fluorescence scored. Chorion thinning and bacterial presence were compared among and between groups using Student's t-test, linear mixed effect model, and Poisson regression model (SAS Cary, NC). RESULTS: In all groups, the fetal chorion cellular layer was thinner at rupture compared to distant site (147.2 vs. 253.7 µm, p<0.0001). Further, chorion thinning was greatest among PPROM subjects compared to all other groups combined, regardless of site sampled [PPROM(114.9) vs. PTL(246.0) vs. PTNL(200.8) vs. TL(217.9) vs. TNL(246.5)]. Bacteria counts were highest among PPROM subjects compared to all other groups regardless of site sampled or histologic infection [PPROM(31) vs. PTL(9) vs. PTNL(7) vs. TL(7) vs. TNL(6)]. Among all subjects at both sites, bacterial counts were inversely correlated with chorion thinning, even excluding histologic chorioamnionitis (p<0.0001 and p = 0.05). CONCLUSIONS: Fetal chorion was uniformly thinner at rupture site compared to distant sites. In PPROM fetal chorion, we demonstrated pronounced global thinning. Although cause or consequence is uncertain, bacterial presence is greatest and inversely correlated with chorion thinning among PPROM subjects.

A theory of hypoellipticity and unique ergodicity for semilinear stochastic PDEs

We present a theory of hypoellipticity and unique ergodicity for semilinear parabolic stochastic PDEs with "polynomial" nonlinearities and additive noise, considered as abstract evolution equations in some Hilbert space. It is shown that if Hörmander's bracket condition holds at every point of this Hilbert space, then a lower bound on the Malliavin covariance operatorμt can be obtained. Informally, this bound can be read as "Fix any finite-dimensional projection on a subspace of sufficiently regular functions. Then the eigenfunctions of μt with small eigenvalues have only a very small component in the image of Π." We also show how to use a priori bounds on the solutions to the equation to obtain good control on the dependency of the bounds on the Malliavin matrix on the initial condition. These bounds are sufficient in many cases to obtain the asymptotic strong Feller property introduced in [HM06]. One of the main novel technical tools is an almost sure bound from below on the size of "Wiener polynomials," where the coefficients are possibly non-adapted stochastic processes satisfying a Lips chitz condition. By exploiting the polynomial structure of the equations, this result can be used to replace Norris' lemma, which is unavailable in the present context. We conclude by showing that the two-dimensional stochastic Navier-Stokes equations and a large class of reaction-diffusion equations fit the framework of our theory.

Metabolic programming and PDHK1 control CD4+ T cell subsets and inflammation.

Activation of CD4+ T cells results in rapid proliferation and differentiation into effector and regulatory subsets. CD4+ effector T cell (Teff) (Th1 and Th17) and Treg subsets are metabolically distinct, yet the specific metabolic differences that modify T cell populations are uncertain. Here, we evaluated CD4+ T cell populations in murine models and determined that inflammatory Teffs maintain high expression of glycolytic genes and rely on high glycolytic rates, while Tregs are oxidative and require mitochondrial electron transport to proliferate, differentiate, and survive. Metabolic profiling revealed that pyruvate dehydrogenase (PDH) is a key bifurcation point between T cell glycolytic and oxidative metabolism. PDH function is inhibited by PDH kinases (PDHKs). PDHK1 was expressed in Th17 cells, but not Th1 cells, and at low levels in Tregs, and inhibition or knockdown of PDHK1 selectively suppressed Th17 cells and increased Tregs. This alteration in the CD4+ T cell populations was mediated in part through ROS, as N-acetyl cysteine (NAC) treatment restored Th17 cell generation. Moreover, inhibition of PDHK1 modulated immunity and protected animals against experimental autoimmune encephalomyelitis, decreasing Th17 cells and increasing Tregs. Together, these data show that CD4+ subsets utilize and require distinct metabolic programs that can be targeted to control specific T cell populations in autoimmune and inflammatory diseases.

Ptolemaic Mummy Stuffings, 2: A Comic Fragment and Grammatical Text in the Yale Collection (P. CtYBR inv. 5019, 5043)

This is the second installment of a three-part project to publish a group of ten Ptolemaic papyri purchased by Yale’s Beinecke Library in 1998 (acquisition “1998b”), which came to the Beinecke as three hard wads that were apparently the stuffing from the stomach cavity of a mummified animal. This article publishes: (1) P.CtYBR inv. 5019, a fragment of line ends in iambic tetrameter catalectic meter from an unknown comedy; the format suggests that this is a further example of certain type of Ptolemaic writing exercise. (2) P.CtYBR inv. 5043, a fragmentary grammatical text of uncertain import.