Productivity, labour cost and export adjustment: Detailed results for 24 EU countries. Bruegel Working Paper 2012/11, 12 July 2012

As a background document for Bruegel Policy Contribution 2012/11 ‘Compositional effects on productivity, labour cost and export adjustment’, this working paper presents detailed results for 24 EU countries on: • The sectoral changes in the economy; • The unit labour costs (ULC) based real effective exchange rate (REER) and its main components; • Export performance. • The ULC-REERs are calculated: • For the total economy, the business sector (excluding agriculture, construction and real estate activities), and some main sectors; • Using both actual aggregates and fixed-weight aggregates, as the latter are free from the impacts of compositional changes; • Against 30 trading partners and against three subsets of trading partners: euro-area, non-euro area EU, non-EU.

Evolving graphs: dynamical models, inverse problems and propagation

Applications such as neuroscience, telecommunication, online social networking, transport and retail trading give rise to connectivity patterns that change over time. In this work, we address the resulting need for network models and computational algorithms that deal with dynamic links. We introduce a new class of evolving range-dependent random graphs that gives a tractable framework for modelling and simulation. We develop a spectral algorithm for calibrating a set of edge ranges from a sequence of network snapshots and give a proof of principle illustration on some neuroscience data. We also show how the model can be used computationally and analytically to investigate the scenario where an evolutionary process, such as an epidemic, takes place on an evolving network. This allows us to study the cumulative effect of two distinct types of dynamics.

It is premature to include non-CO2 effects of aviation in emission trading schemes

The recent G8 Gleneagles climate statement signed on 8 July 2005 specifically mentions a determination to lessen the impact of aviation on climate [Gleneagles, 2005. The Gleneagles communique: climate change, energy and sustainable development. http://www.fco.gov.uk/Files/kfile/PostG8_Gleneagles_Communique.pdf]. In January 2005 the European Union Emission Trading Scheme (ETS) commenced operation as the largest multi-country, multi-sector ETS in the world, albeit currently limited only to CO2 emissions. At present the scheme makes no provision for aircraft emissions. However, the UK Government would like to see aircraft included in the ETS and plans to use its Presidencies of both the EU and G8 in 2005 to implement these schemes within the EU and perhaps internationally. Non-CO2 effects have been included in some policy-orientated studies of the impact of aviation but we argue that the inclusion of such effects in any such ETS scheme is premature; we specifically argue that use of the Radiative Forcing Index for comparing emissions from different sources is inappropriate and that there is currently no metric for such a purpose that is likely to enable their inclusion in the near future. (c) 2005 Elsevier Ltd. All rights reserved.

Glucosinolate-accumulating S-cells in Arabidopsis leaves and flower stalks undergo programmed cell death at early stages of differentiation

Plant secondary metabolites glucosinolates (GSL) have important functions in plant resistance to herbivores and pathogens. We identified all major GSL that are accumulated in S-cells in Arabidopsis by MALDI-TOF MS, and estimated by LC-MS that the total GSL concentration in these cells is above 130 mM. The precise locations of the S-cells outside phloem bundles in rosette and cauline leaves and in flower stalks were visualised using sulphur mapping by cryo-SEM/EDX. S-cells contain up to 40% of total sulphur in flower stalk tissues. S-cells in emerging flower stalks and developing leaf tissues show typical signs of Programmed Cell Death (PCD) or apoptosis, such as chromatin condensation in the nucleus and blebbing of the membranes. TUNEL staining for DNA double strand breaks confirmed PCD in S-cells in postmeristematic tissues in the flower stalk as well as in the leaf. Our results show that S-cells in postmeristematic tissues proceed to an extreme degree of metabolic specialisation besides PCD. Accumulation and maintenance of a high concentration of GSL in these cells are accompanied by degradation of a number of cell organelles. The substantial changes in the cell composition during S-cell differentiation indicate the importance of this particular GSL-based phloem defence system. The specific anatomy of the S-cells and ability to accumulate specialised secondary metabolites is similar to that of the non-articulated laticifer cells in latex plants and thus indicates a common evolutionary origin.

Host niches and defensive extended phenotypes structure parasitoid wasp communities

Oak galls are spectacular extended phenotypes of gallwasp genes in host oak tissues and have evolved complex morphologies that serve, in part, to exclude parasitoid natural enemies. Parasitoids and their insect herbivore hosts have coevolved to produce diverse communities comprising about a third of all animal species. The factors structuring these communities, however, remain poorly understood. An emerging theme in community ecology is the need to consider the effects of host traits, shaped by both natural selection and phylogenetic history, on associated communities of natural enemies. Here we examine the impact of host traits and phylogenetic relatedness on 48 ecologically closed and species-rich communities of parasitoids attacking gall-inducing wasps on oaks. Gallwasps induce the development of spectacular and structurally complex galls whose species- and generation-specific morphologies are the extended phenotypes of gallwasp genes. All the associated natural enemies attack their concealed hosts through gall tissues, and several structural gall traits have been shown to enhance defence against parasitoid attack. Here we explore the significance of these and other host traits in predicting variation in parasitoid community structure across gallwasp species. In particular, we test the "Enemy Hypothesis,'' which predicts that galls with similar morphology will exclude similar sets of parasitoids and therefore have similar parasitoid communities. Having controlled for phylogenetic patterning in host traits and communities, we found significant correlations between parasitoid community structure and several gall structural traits (toughness, hairiness, stickiness), supporting the Enemy Hypothesis. Parasitoid community structure was also consistently predicted by components of the hosts' spatiotemporal niche, particularly host oak taxonomy and gall location (e.g., leaf versus bud versus seed). The combined explanatory power of structural and spatiotemporal traits on community structure can be high, reaching 62% in one analysis. The observed patterns derive mainly from partial niche specialisation of highly generalist parasitoids with broad host ranges (>20 hosts), rather than strict separation of enemies with narrower host ranges, and so may contribute to maintenance of the richness of generalist parasitoids in gallwasp communities. Though evolutionary escape from parasitoids might most effectively be achieved via changes in host oak taxon, extreme conservatism in this trait for gallwasps suggests that selection is more likely to have acted on gall morphology and location. Any escape from parasitoids associated with evolutionary shifts in these traits has probably only been transient, however, due to subsequent recruitment of parasitoid species already attacking other host galls with similar trait combinations.

An integrated assessment of carbon dioxide capture and storage in the UK

Geological carbon dioxide storage (CCS) has the potential to make a significant contribution to the decarbonisation of the UK. Amid concerns over maintaining security, and hence diversity, of supply, CCS could allow the continued use of coal, oil and gas whilst avoiding the CO2 emissions currently associated with fossil fuel use. This project has explored some of the geological, environmental, technical, economic and social implications of this technology. The UK is well placed to exploit CCS with a large offshore storage capacity, both in disused oil and gas fields and saline aquifers. This capacity should be sufficient to store CO2 from the power sector (at current levels) for a least one century, using well understood and therefore likely to be lower-risk, depleted hydrocarbon fields and contained parts of aquifers. It is very difficult to produce reliable estimates of the (potentially much larger) storage capacity of the less well understood geological reservoirs such as non-confined parts of aquifers. With the majority of its large coal fired power stations due to be retired during the next 15 to 20 years, the UK is at a natural decision point with respect to the future of power generation from coal; the existence of both national reserves and the infrastructure for receiving imported coal makes clean coal technology a realistic option. The notion of CCS as a ‘bridging’ or ‘stop-gap’ technology (i.e. whilst we develop ‘genuinely’ sustainable renewable energy technologies) needs to be examined somewhat critically, especially given the scale of global coal reserves. If CCS plant is built, then it is likely that technological innovation will bring down the costs of CO2 capture, such that it could become increasingly attractive. As with any capitalintensive option, there is a danger of becoming ‘locked-in’ to a CCS system. The costs of CCS in our model for UK power stations in the East Midlands and Yorkshire to reservoirs in the North Sea are between £25 and £60 per tonne of CO2 captured, transported and stored. This is between about 2 and 4 times the current traded price of a tonne of CO2 in the EU Emissions Trading Scheme. In addition to the technical and economic requirements of the CCS technology, it should also be socially and environmentally acceptable. Our research has shown that, given an acceptance of the severity and urgency of addressing climate change, CCS is viewed favourably by members of the public, provided it is adopted within a portfolio of other measures. The most commonly voiced concern from the public is that of leakage and this remains perhaps the greatest uncertainty with CCS. It is not possible to make general statements concerning storage security; assessments must be site specific. The impacts of any potential leakage are also somewhat uncertain but should be balanced against the deleterious effects of increased acidification in the oceans due to uptake of elevated atmospheric CO2 that have already been observed. Provided adequate long term monitoring can be ensured, any leakage of CO2 from a storage site is likely to have minimal localised impacts as long as leaks are rapidly repaired. A regulatory framework for CCS will need to include risk assessment of potential environmental and health and safety impacts, accounting and monitoring and liability for the long term. In summary, although there remain uncertainties to be resolved through research and demonstration projects, our assessment demonstrates that CCS holds great potential for significant cuts in CO2 emissions as we develop long term alternatives to fossil fuel use. CCS can contribute to reducing emissions of CO2 into the atmosphere in the near term (i.e. peak-shaving the future atmospheric concentration of CO2), with the potential to continue to deliver significant CO2 reductions over the long term.

Learning across business sectors: Knowledge sharing between aerospace and construction

This report addresses the extent that managerial practices can be shared between the aerospace and construction sectors. Current recipes for learning from other industries tend to be oversimplistic and often fail to recognise the embedded and contextual nature of managerial knowledge. Knowledge sharing between business sectors is best understood as an essential source of innovation. The process of comparison challenges assumptions and better equips managers to cope with future change. Comparisons between the aerospace and construction sectors are especially useful because they are so different. The two sectors differ hugely in terms of their institutional context, structure and technological intensity. The aerospace sector has experienced extensive consolidation and is dominated by a small number of global companies. Aerospace companies operate within complex networks of global interdependency such that collaborative working is a commercial imperative. In contrast, the construction sector remains highly fragmented and is characterised by a continued reliance on small firms. The vast majority of construction firms compete within localised markets that are too often characterised by opportunistic behaviour. Comparing construction to aerospace highlights the unique characteristics of both sectors and helps explain how managerial practices are mediated by context. Detailed comparisons between the two sectors are made in a range of areas and guidance is provided for the implementation of knowledge sharing strategies within and across organisations. The commonly accepted notion of ‘best practice’ is exposed as a myth. Indeed, universal models of best practice can be detrimental to performance by deflecting from the need to adapt continuously to changing circumstances. Competitiveness in the construction sector too often rests on efficiency in managing contracts, with a particular emphasis on the allocation of risk. Innovation in construction tends to be problem-driven and is rarely shared from project to project. In aerospace, the dominant model of competitiveness means that firms have little choice other than to invest in continuous innovation, despite difficult trading conditions. Research and development (R&D) expenditure in aerospace continues to rise as a percentage of turnovers. A sustained capacity for innovation within the aerospace sector depends crucially upon stability and continuity of work. In the construction sector, the emergence of the ‘hollowed-out’ firm has undermined the industry’s capacity for innovation. Integrated procurement contexts such as prime contracting in construction potentially provide a more supportive climate for an innovation-based model of competitiveness. However, investment in new ways of working depends upon a shift in thinking not only amongst construction contractors, but also amongst the industry’s major clients.

Hitting emissions targets with (statistical) confidence in multi-instrument Emissions Trading Schemes

A means of assessing, monitoring and controlling aggregate emissions from multi-instrument Emissions Trading Schemes is proposed. The approach allows contributions from different instruments with different forms of emissions targets to be integrated. Where Emissions Trading Schemes are helping meet specific national targets, the approach allows the entry requirements of new participants to be calculated and set at a level that will achieve these targets. The approach is multi-levelled, and may be extended downwards to support pooling of participants within instruments, or upwards to embed Emissions Trading Schemes within a wider suite of policies and measures with hard and soft targets. Aggregate emissions from each instrument are treated stochastically. Emissions from the scheme as a whole are then the joint probability distribution formed by integrating the emissions from its instruments. Because a Bayesian approach is adopted, qualitative and semi-qualitative data from expert opinion can be used where quantitative data is not currently available, or is incomplete. This approach helps government retain sufficient control over emissions trading scheme targets to allow them to meet their emissions reduction obligations, while minimising the need for retrospectively adjusting existing participants’ conditions of entry. This maintains participant confidence, while providing the necessary policy levers for good governance.

Resource availability and the persistence of seed-eating bird populations in agricultural landscapes – a mechanistic modelling approach

1. Reductions in resource availability, associated with land-use change and agricultural intensification in the UK and Europe, have been linked with the widespread decline of many farmland bird species over recent decades. However, the underlying ecological processes which link resource availability and population trends are poorly understood. 2. We construct a spatial depletion model to investigate the relationship between the population persistence of granivorous birds within the agricultural landscape and the temporal dynamics of stubble field availability, an important source of winter food for many of those species. 3. The model is capable of accurately predicting the distribution of a given number of finches and buntings amongst patches of different stubble types in an agricultural landscape over the course of a winter and assessing the relative value of different landscapes in terms of resource availability. 4. Sensitivity analyses showed that the model is relatively robust to estimates of energetic requirements, search efficiency and handling time but that daily seed survival estimates have a strong influence on model fit. Understanding resource dynamics in agricultural landscapes is highlighted as a key area for further research. 5. There was a positive relationship between the predicted number of bird days supported by a landscape over-winter and the breeding population trend for yellowhammer Emberiza citrinella, a species for which survival has been identified as the primary driver of population dynamics, but not for linnet Carduelis cannabina, a species for which productivity has been identified as the primary driver of population dynamics. 6. Synthesis and applications. We believe this model can be used to guide the effective delivery of over-winter food resources under agri-environment schemes and to assess the impacts on granivorous birds of changing resource availability associated with novel changes in land use. This could be very important in the future as farming adapts to an increasingly dynamic trading environment, in which demands for increased agricultural production must be reconciled with objectives for environmental protection, including biodiversity conservation.

Vertex splitting and connectivity augmentation in hypergraphs

We consider problems of splitting and connectivity augmentation in hypergraphs. In a hypergraph G = (V +s, E), to split two edges su, sv, is to replace them with a single edge uv. We are interested in doing this in such a way as to preserve a defined level of connectivity in V . The splitting technique is often used as a way of adding new edges into a graph or hypergraph, so as to augment the connectivity to some prescribed level. We begin by providing a short history of work done in this area. Then several preliminary results are given in a general form so that they may be used to tackle several problems. We then analyse the hypergraphs G = (V + s, E) for which there is no split preserving the local-edge-connectivity present in V. We provide two structural theorems, one of which implies a slight extension to Mader’s classical splitting theorem. We also provide a characterisation of the hypergraphs for which there is no such “good” split and a splitting result concerned with a specialisation of the local-connectivity function. We then use our splitting results to provide an upper bound on the smallest number of size-two edges we must add to any given hypergraph to ensure that in the resulting hypergraph we have λ(x, y) ≥ r(x, y) for all x, y in V, where r is an integer valued, symmetric requirement function on V*V. This is the so called “local-edge-connectivity augmentation problem” for hypergraphs. We also provide an extension to a Theorem of Szigeti, about augmenting to satisfy a requirement r, but using hyperedges. Next, in a result born of collaborative work with Zoltán Király from Budapest, we show that the local-connectivity augmentation problem is NP-complete for hypergraphs. Lastly we concern ourselves with an augmentation problem that includes a locational constraint. The premise is that we are given a hypergraph H = (V,E) with a bipartition P = {P1, P2} of V and asked to augment it with size-two edges, so that the result is k-edge-connected, and has no new edge contained in some P(i). We consider the splitting technique and describe the obstacles that prevent us forming “good” splits. From this we deduce results about which hypergraphs have a complete Pk-split. This leads to a minimax result on the optimal number of edges required and a polynomial algorithm to provide an optimal augmentation.

Transport impacts on atmosphere and climate: metrics

The transport sector emits a wide variety of gases and aerosols, with distinctly different characteristics which influence climate directly and indirectly via chemical and physical processes. Tools that allow these emissions to be placed on some kind of common scale in terms of their impact on climate have a number of possible uses such as: in agreements and emission trading schemes; when considering potential trade-offs between changes in emissions resulting from technological or operational developments; and/or for comparing the impact of different environmental impacts of transport activities. Many of the non-CO2 emissions from the transport sector are short-lived substances, not currently covered by the Kyoto Protocol. There are formidable difficulties in developing metrics and these are particularly acute for such short-lived species. One difficulty concerns the choice of an appropriate structure for the metric (which may depend on, for example, the design of any climate policy it is intended to serve) and the associated value judgements on the appropriate time periods to consider; these choices affect the perception of the relative importance of short- and long-lived species. A second difficulty is the quantification of input parameters (due to underlying uncertainty in atmospheric processes). In addition, for some transport-related emissions, the values of metrics (unlike the gases included in the Kyoto Protocol) depend on where and when the emissions are introduced into the atmosphere – both the regional distribution and, for aircraft, the distribution as a function of altitude, are important. In this assessment of such metrics, we present Global Warming Potentials (GWPs) as these have traditionally been used in the implementation of climate policy. We also present Global Temperature Change Potentials (GTPs) as an alternative metric, as this, or a similar metric may be more appropriate for use in some circumstances. We use radiative forcings and lifetimes from the literature to derive GWPs and GTPs for the main transport-related emissions, and discuss the uncertainties in these estimates. We find large variations in metric (GWP and GTP) values for NOx, mainly due to the dependence on location of emissions but also because of inter-model differences and differences in experimental design. For aerosols we give only global-mean values due to an inconsistent picture amongst available studies regarding regional dependence. The uncertainty in the presented metric values reflects the current state of understanding; the ranking of the various components with respect to our confidence in the given metric values is also given. While the focus is mostly on metrics for comparing the climate impact of emissions, many of the issues are equally relevant for stratospheric ozone depletion metrics, which are also discussed.

The transition of the Polish real estate market within a Central and Eastern European context

The real estate market in Poland is a relatively immature market, but one that has been experiencing substantial transformation. The development of the market has been encouraged by a number of factors, including changes arising as a result of new legislation and the migration of capital between capital markets. The progress of the real estate sector towards a western style competitive market has taken place within the gradual transformation of the Polish economy into a free market economy. As investment grade property is in relatively short supply in Poland, investors consider opportunities within the wider CEE block. An analysis of the risk-return characteristics of the three largest CEE real estate markets namely, Poland, Hungary and Czech Republic, shows that the returns in these markets have been negatively correlated with the UK. As these economies and markets evolve, and being part of the wider EU trading block, their economic performance will slowly converge and become more synchronized with their western counterparts. However, the catch-up of the CEE markets to western European performance cycles will be protracted and consequently there are likely to be significant ongoing portfolio risk reduction opportunities