Mixed signals: market incentives, recycling, and the price spike of 1995

Environmental economics assumes that reliance on price signals, adjusted for externalities, normally leads to efficient solutions to environmental problems. We explore a limiting case, when market volatility created ‘mixed signals’: prices of waste paper and other recycled materials were suddenly extremely high in 1994–1995, then plummeted back to traditional low levels in 1996. These rapid reversals resulted in substantial economic and political costs. A review of academic and business literature suggests six possible explanations for abrupt price spikes. An econometric analysis of the prices of wood pulp and waste paper shows that factor which explained price changes in 1983–1993 contribute very little to understanding the subsequent price spike. From the econometric analysis and from other sources, we conclude that speculation must have played a major role in the price spike, perhaps in combination with modest effects from changes in government policy and in export demand. If speculatively driven price spikes can disrupt an environmentally important industry such as recycling, what is the appropriate role for public policy? When price volatility is sufficiently disruptive, then measures to control or stabilize prices, rather than interfering with the market, might help to make it more efficient.     

碳排放交易体系的政策灵活性:国际经验及启示

在《联合国气候变化框架公约》和《京都议定书》的背景下,越来越多的国家开始关注全球气候变暖的问题。考虑到碳排放交易体系比碳税更具有政治可行性,不少国家或地区开始实施碳排放交易体系,以最低的减排成本来达到温室气体减排目标。然而,采用碳排放交易体系,其排放总量是固定的,而减排成本是不确定的,可能会出现由于政策或外部冲击而产生的配额价格异常波动的现象。因此,为确保碳排放交易体系的成本有效性,政策灵活性十分重要。在理想情况下,碳排放市场具有完全的时间灵活性(包括长期的履约期、自由的配额储存与预借)和空间灵活性(即建立全球碳市场),这将对增强市场流动性、降低减排成本、缓解价格波动起到重要的作用。然而,由于政策设计需要考虑更多因素,实际上理想状态很难达到。本文将对国外碳排放交易体系的政策灵活性设计进行较为系统的分析和比较,尤其关注履约期的长短、配额的跨期使用、配额的抵消、区域碳市场连接等方面的具体政策设计,这对我国在7个省市进行碳排放交易试点以及今后建立全国性的碳排放交易体系有较强的借鉴意义。     

An analysis of variables influencing the material composition of automobiles

The use of materials is studied broadly, because of the environmental problems related to extraction, production, consumption and waste treatment. The use and substitution of materials in products is therefore a relevant issue for environmental policy making. Studies have been done to describe the material flow or to measure the impact of materials or products on the environment. However, these studies do not often consider economic, substitution and dynamic aspects of material flows. Other studies on material flows analyse the relationship between the use of materials and economic growth, but they do not consider substitution between materials. For environmental policy making economic, technological and environmental aspects of the use of materials need to be considered. Especially, substitution of materials is important. In various countries material and product policies are imposed on a variety of materials and products. For evaluation of these policies their environmental and economic effects need to be examined in detail. This study aims to analyse the economic and technological factors influencing the use of materials and the substitution between different materials dynamically. The goal is to obtain an insight in the effect that material levies may have on the use and substitution of materials. The statistical analysis is performed on a specific product-group because decisions on the use of materials are taken on a product-level. The case study is performed on automobiles. The results show that the material use is largely an autonomous development. The price of aluminium has a positive, significant effect on the use of that material. The price of plastics has a positive, but not significant effect on the use of plastics. Reasons may be that the costs of a raw material are small relative to the processing costs, and that the production process can only be changed slowly. Other factors, like competitiveness and consumers' tastes, may be more important for substitution. This implies that levies or subsidies on certain materials is not a promising policy to change the use of materials. Besides time, there are two other factors that have a positive and significant relationship with the use of aluminium and plastics: the fuel efficiency, which is the distance driven divided by the energy used; and, the road tax, which depends on the weight of a car. However, these effects are caused by their positive relationship with time. The main conclusion of the case study is that imposing a levy on materials may not have the desired or expected effect of reduction in material use.     

Developing markets for recyclate: perspectives from south Wales

This paper introduces the problems of a market-driven waste management strategy in the UK and the momentum towards developing markets for recycled materials. It focuses on the demand side barriers and principally the need for market stimulation in the end uses for recyclables. The important role, which small- and medium-sized manufacturing enterprises (SMEs) have to play in developing existing markets for recyclate, is discussed. SMEs also have the potential to contribute to the radical new approach of identifying and developing a broad range of new, more diverse and higher value uses for recyclate. If these enterprises are to be engaged effectively then regional action is essential. The paper then reports on research work focusing on SMEs that has taken place as a component of the CWMRE (Creating Welsh Markets for REcyclate) market development initiative in Wales. As a foundation for this, a series of semi-structured interviews with SMEs has been conducted with those operating in sectors that are known to have the potential to provide novel applications for secondary materials or to have the potential for material displacement. Some of the barriers and corresponding needs within the case study companies involved are discussed. The implications of these findings for a regional market development programme are considered and in particular how these case studies support the need to engage SMEs in the use of secondary materials.     

The effect of prices on the recycling of waste materials

Recycling policy, insofar as it exists, tends to be heavily weighted towards price manipulation. However, it is by now fairly well established that the supply of secondary materials is in most cases quite unresponsive to price changes, so that price-based policies are very unlikely to be effective. This view is further borne out by an attempt to consider explicitly the sort of adjustment processes which must necessarily occur in the generally volatile markets for waste materials. It is suggested that price-oriented policies must first influence the expectations of potential suppliers before any response is forthcoming When this is considered along with the evidently small reaction to those expectations, an even more pessimistic conclusion about the suitability of standard measures to encourage recycling is reached.     

Future markets: An alternative for stabilizing secondary materials markets?

The authors present an economic justification for extramarket intervention in the markets for secondary materials and briefly discuss the possible impacts of futures trading on the cash market for a commodity. These impacts are applied to the markets for secondary materials and the potential effects are assessed. They conclude with a rationale for public participation in initiating a scrap futures market.     

Testing the international linkage in the platinum-group metal futures markets

This study tests whether an international market exists in the platinum-group metal (PGM) futures markets. For this purpose, we tested the law of one price (LOP) and the causality between the U.S. and Japanese platinum and palladium futures markets. We also performed the test when structural breaks are considered. Long-run price relationships were found in both platinum and palladium markets but the LOP only sustained in the palladium market. The causality test revealed that it is the U.S. market that leads the price to transmit information between the U.S. and Japanese markets. Structural breaks had large impacts on the test results, suggesting that incorporating breaks is important when investigating the international price linkage in the PGM futures markets.     

京、沪、穗口岸入境外国旅游市场特征对比研究

我国入境旅游市场长期呈现港澳台市场占80％以上,外国市场不足20％的“二八”结构,因此拓展入境旅游外国市场是我国旅游业发展的重要任务。北京、上海、广州三大口岸是我国入境旅游发展的“桥头堡”,也是其他省市入境旅游发展的“二手客源地”,在我国人境旅游业中占据着十分重要的地位。采用问卷调查法,以从京、沪、穗口岸入境的外国游客作为调查对象,对三大口岸间的外国市场进行对比分析,并将其作为整体与全国入境外国市场进行对比研究,以期为拓展全国和其他省市的入境旅游外国市场规模提供理论指导。结论为：①从三大口岸入境的外国市场具有各自的特征,但在年龄结构、职业结构和学历结构上具有一致性。②从不同口岸入境的外国市场具有不同的空间分布范围和扩散能力。③从三大口岸入境的外国市场特征对全国入境外国市场特征具有控制作用。     

An empirical approach to determine specific weights of driving factors for the price of commodities—A contribution to the measurement of the economic scarcity of minerals and metals

In recent years, commodity markets show a large amount of volatility and substantial price jumps, indicating an increasing economic scarcity in many cases. As this scarcity makes commodity procurement a critical issue for national economies, industry sectors and manufacturing companies, a number of criticality indices have been presented and utilized in science as well as in practice. These indices are mostly based on an aggregation of different key figures, both qualitative and quantitative. However, the weighting of the different factors is in most cases arbitrary or based on rough estimates.     

On the transmission of the effects of monetary policy to the regions

In the paper the theoretical framework is that of credit rationing theory, the regional differences being examined in terms of both financial markets and the real economy. Empirically the focus is upon regional trends in market conditions and the timelags experienced in the effects of monetary policies in two different regions. The period of time examined is from 1970 to 1978, the changes in the marginal interest on central bank credit issued to the commercial banks being taken as the indicator of monetary policy and data on employment opportunities vacant in the regions as representing market conditions and the delay‐effects of monetary policy. The methods used are those of cross‐correlation analysis.     

Composite market design for a Transferable Discharge Permit (TDP) system

There has been a great deal of interest in addressing water quality issues through the use of Transferable Discharge Permit (TDP) systems. Unfortunately, the attempts to start up permit markets that are able to exploit abatement cost differences between sources have not met with the success expected. Two of the reasons for the lack of success have been the problem of transaction costs and in the case of non-point sources (NPS), undefined property rights. The composite market design is a proposal for a TDP system that specifically includes agricultural non-point source (NPS) discharges and addresses both property rights and transaction cost problems. The composite market consists of three interrelated markets each serving a particular function. The two primary markets are coordinated through price information that makes it possible for a catchment-based authority to issue (sell) permits based on the marginal cost of abatement. When the composite market is mature, the total number of permits issued corresponds to a cap on discharges allowed in the catchment. The structure of the composite market allows this system to be phased in over time with existing institutions and limited demands on financing.     

Instability in primary commodity markets

The two principal objectives of this paper are, first, to consider the behaviour of primary commodity prices on world markets. In particular, the degree of price instability in each of 19 primary commodity markets in the period 1953–1974, and the long-run behaviour of primary commodity prices relative to the price of manufactures (‘the terms of trade’) are analysed. Secondly, measures of export earnings instability are presented which determine its degree and geographical extent. The importance of world primary commodity trade both for the developed countries as major importers and exporters and for the less developed countries as large exporters is also pointed out.     

Mineral commodity stabilisation: The producers' view

The author compares the relative merits of production cuts and buffer stocks as measures for market stabilisation in mineral commodity markets. He concludes that, although under certain conditions producers may gain by building up buffer stocks at times of relatively low demand, the low global price elasticities in most minerals markets make it likely that producers' interests would usually be better served by production cuts when demand falls.     

Investor demand and spot commodity prices

The on-going debate over the influence of investor demand on spot commodity prices largely attempts to assess this influence by measuring the growth in investor demand in recent years. Given the serious data problems that plague such analyses, this article pursues another approach in the hope of providing useful insights into the impact of investor demand on spot commodity prices. It focuses on the mechanisms by which investor demand affects spot prices, and in particular on two questions. First, how does an increase in investor demand on the futures markets affect the spot market and spot price? Second, when investor demand is increasing and pushing a commodity's price up, do physical stocks of the commodity also have to be rising, as economists and others widely assume?On the first question, the article concludes that a surge in investor demand raising prices on the futures markets will have a direct and comparable effect on the spot market prices when these markets are in strong contango. However, when markets are in weak contango or backwardation, price movements in the futures markets have a much looser effect on spot prices. As a result, changes in investor demand on the futures markets may have little or no influence on spot prices in the absence of a strong contango. Instead, changes in fundamentals (that is, producer supply and consumer demand) and possibly changes in investor demand taking place directly on the spot market largely determine the spot price at such times.On the second question, the article shows that investor demand can be pushing up a commodity's price even when investor stocks are falling, despite the widespread presumption to the contrary.     

A value proposition: Resource recovery from faecal sludge—Can it be the driver for improved sanitation?

There is currently a lack of access to affordable sanitation in urban areas of Sub-Saharan Africa. This study evaluated the potential for resource recovery from innovative faecal sludge treatment processes to generate a profit that could help sustain the sanitation service chain. A total of 242 interviews were conducted in Accra, Ghana; Dakar, Senegal; and Kampala, Uganda to compare markets in different cultural and regional contexts. Products identified to have potential market value include dry sludge as a fuel for combustion, biogas from anaerobic digestion, protein derived from sludge processing as animal feed, sludge as a component in building materials, and sludge as a soil conditioner. The market demand and potential revenue varied from city to city based on factors such as sludge characteristics, existing markets, local and regional industrial sectors, subsidies, and locally available materials. Use as a soil conditioner, which has been the most common end use of treated sludge, was not as profitable as other end uses. These findings should help policy and decision makers of sanitation service provision to design financially viable management systems based on resource recovery options.     

Minerals policy in Europe: Some recent developments

The importance of a secured supply of raw materials for the European economy is evident. However, securing the supply of raw materials based on an appropriate EU minerals policy has been scarcely treated by the decision-makers in the last decades. Solely the impact of price development of international commodity markets in the last years induces a re-thinking of this field. The EU Raw Materials Initiative, which was published by the European Commission in November 2008, establishes an EU raw materials strategy including a list of actions.     

Evaluation of life cycle inventory data for recycling systems

This paper reviews databases on material recycling (primary as well as secondary production) used in life cycle assessments (LCA) of waste management systems. A total of 366 datasets, from 1980 to 2010 and covering 14 materials, were collected from databases and reports. Totals for CO₂-equivalent emissions were compared to illustrate variations in the data. It was hypothesised that emissions from material production and the recycling industry had decreased over time due to increasing regulation, energy costs and process optimisation, but the reported datasets did not reveal such a general trend. Data representing the same processes varied considerably between databases, and proper background information was hard to obtain, which in turn made it difficult to explain the large differences observed. Those differences between the highest and lowest estimated CO₂ emissions (equivalents) from the primary production of newsprint, HDPE and glass were 238%, 443% and 452%, respectively. For steel and aluminium the differences were 1761% and 235%, respectively. There is a severe lack of data for some recycled materials; for example, only one dataset existed for secondary cardboard. The study shows that the choice of dataset used to represent the environmental load of a material recycling process and credited emissions from the avoided production of virgin materials is crucial for the outcome of an LCA on waste management. Great care and a high degree of transparency are mandatory, but advice on which datasets to use could not be determined from the study. However, from the gathered data, recycling in general showed lower emission of CO₂ per kg material than primary production, so the recycling of materials (considered in this study) is thus beneficial in most cases.     

Jumps in Euribor and the effect of ECB monetary policy announcements

The main tool that the ECB uses to influence monetary policy is through the short-term refinancing rate, a change in the short-term interest rate can in turn cause the whole yield curve to shift. In addition to central bank announcements, interbank rates such as Euribor are also influenced by, forward guidance from the ECB, various macroeconomic events, liquidity in the money markets and the perceived credit worthiness of financial institutions. Forward rates are usually used by policy makers and market practitioners to examine expectations, but options provide additional information about the uncertainty of these expectations, particularly future jump expectations. This research examines the jump characteristics of the 3-month Euribor futures contract and its corresponding futures option contracts using both a jump diffusion model with a Bernoulli jump distribution and option-implied parameters using a jump diffusion process with Poisson distribute. We find that both the Bernoulli jump analysis of historical data and implied jump diffusion model succinctly capture diffusion volatility, jumps and jump size. Using a regression analysis to examine the effect of ECB refinancing rate monetary policy announcements on the 3-month Euribor and the associated jump parameters, we find a significant relationship between ECB announcements and the probability of a jump in Euribor. Regression coefficients on the implied jump amplitude parameters suggest that the market correctly anticipates the direction of the rate announcement suggesting option-implied jump parameters can predict, to some extent, ECB announcements. However, our results also show that there is significant uncertainty before the announcements, and this implies that monetary policy communication is not having the full desired effect.     

Factor demand flexibility in the primary aluminium industry: Evidence from stagnating and expanding regions

The purpose of the paper is to analyse and compare short-run factor demand responses to price changes in the primary aluminium industry in Western Europe and the Africa-Middle East (AME) region. We outline a Translog variable cost function model, which is estimated employing a panel data set at the individual smelter level over the time period 1990-2003. The empirical results show evidence of limited - but far from insignificant - price-induced factor demand responses in the short-run. Overall aluminium smelters in the AME-region show evidence of higher estimated short-run own- and cross-price elasticities than their competitors in Western Europe, at least when it comes to labour and electricity demand. One important reason for this result is the greater number of pot lines with slightly different technologies at each smelter as well as the more intense use of the Prebake technology in the AME-region making retrofits in existing plants less costly than in Western Europe. The results also suggest that in both regions the demand for electricity has over time become less sensitive to short-run price changes, while the labour and material demand responses to price changes have increased but only in the AME-region. The liberalisation of the Western European electricity markets in combination with the rigid labour markets in this part of the world suggest that the shift in production capacity from the western world to the AME-region as well as China may continue.     

Recycling and householder attitudes: A survey of Norwich

This paper incorporates the results of a survey of recycling activity and attitudes in one UK community, the city of Norwich. The principal aims of the study were to identify the operation of the local market in secondary materials and to assess householder attitudes towards new recycling ventures and the use of recycled paper products. The main findings of the study indicate that a well established secondary paper and metals markets does exist in Norwich. Householder attitudes to recycled products seem, as far as paper is concerned, to depend upon the quality (texture and colour) of the products. As for the collection of secondary materials, better deployment of existing volunteer/charity based groups would appear to be a more ‘economic’ strategy than direct local authority involvement.