Friday, June 28, 2024

Member Blog: David Zilberman

Integrating Technology and Policy To Tackle Climate Change Under the Italian Sun

Our bioeconomy consortium (ICABR) returned to Ravello after five years of pandemic and meetings in Bologna and Argentina. Ravello is as charming as ever. I still enjoy climbing the steps and taking in the view, but I do it slower. Both the regulars and some new faces participated in this glorious meeting. There was a lot to learn, and here are some highlights. 

We started with a pre-conference investigating how the California bioeconomy can benefit from the knowledge of the rest of the world. California has the largest agricultural sector in the US, and many of the discoveries of modern biotechnology happen in this state. While the coastal area of California is rich, the Central Valley, where agriculture is practiced, has a lot of poverty and problems with pollution and water scarcity. Generally, people ask what the world can learn from California, but we still have much to learn. For example, Denmark is a country with a thriving agribusiness sector, established a circular bioeconomy where agricultural residues (for example, animal wastes) are utilized to produce valuable products (natural gas), and the value-added of agricultural products (processed meats) is the source of income and wealth. Japan, a country with an aging population, has developed technologies that make it easier to farm and live in the rural sector and can be exported. Robots can weed and harvest crops and serve as personal assistants in daily tasks. Israel developed precise irrigation technologies that increase irrigation efficiency and adjust water application to soil and weather conditions. It also introduced technologies that recycle wastewater and desalinate seawater to address water scarcity problems. In all cases, private and public partnerships provided the resources and the knowledge base to build technological and institutional solutions that led to meaningful change. We learned that California is starting to introduce similar solutions. With an aging farm labor force and higher minimum wage, there are new technological solutions to improve precision, workers’ safety, and efforts required for harvesting, and there are emerging technologies to recycle water and reduce pollution. What is needed is to strengthen the research and educational capacity of the Central Valley, as well as creative mechanisms to establish value-added industries that better utilize the varying resources. The potential for learning and implementing these innovative solutions is genuinely inspiring. 

One area of emphasis was understanding productivity and technological change. This is reasonable since the bioeconomy expands the range of products from renewable resources beyond food and fibers to include chemicals, pharmaceuticals, and carbon sequestration, and its growth depends on technological progress. One message is the importance of heterogeneity. Significant agricultural productivity differences exist among regions, reflecting biophysical and socioeconomic differences. Uniform development policies could be more efficient, but new tools must be used and adjusted to variability. In the modern era, increased agricultural productivity replaced labor and land with capital and chemicals, contributing to lower food prices and population growth. It also had significant negative environmental effects in many places. However, the increase in productivity was much more considerable than the increase in input use. Much of the growth in agricultural input is due to increased efficiency in agricultural systems (referred to as “total factor productivity,” or TFP). Without it, we would need more than double the amount of land, much more than we use today. The increase in TFP also significantly reduced the negative side effects of agriculture compared to what it could have been. The gains in productivity, measured by TFP, vary by location and across regions. 

Research and development are crucial contributors to technological change, but they require investment in human capital and industries that take advantage of new knowledge. TFP has declined in the 21st century compared to the post-WW2 era. One possible explanation is a reduction in investments in agricultural research and development. Another is climate change and the reduction of productivity it entails. If we want to counter the losses from climate change, we may need to invest more in R&D. A third explanation is regulation. The most important breakthrough in the life sciences was genetic engineering. Still, the heavy regulation of these technologies does not provide incentives to invest in them and take full advantage of these new capabilities. To develop a bioeconomy that would allow us to address the challenges of food security, climate change, and biodiversity loss, we must invest more in research and introduce an enabling regulatory environment. 

Establishing a uniform global price for carbon emissions would be ideal, but this is not likely to happen in the near future. Countries (e.g., EU members) that introduce carbon pricing mechanisms also introduce extra greenhouse gas emission costs on imports from countries without the appropriate carbon pricing. While these policies may lead to more harmonization of carbon pricing among nations, they may also harm developing countries significantly. The pursuit of expanded pricing of carbon globally needs to be accompanied by providing technical assistance and aid to developing countries to mitigate greenhouse gas emissions and adapt to climate change.

We have seen that developing responses to climate change policies and other challenges depends on Political-economic considerations. The “end of history,” when capitalism and democracy dominate, hasn’t happened. So, we had a session about capitalism and democracy. Both are resource allocation methods, but the weight given to different groups varies. The rich have much more power in determining market outcomes. Economic historians (Schumpeter) argue that capitalism generates economic growth that provides the conditions for the emergence of a democracy. However, the excess of capitalism may lead to plutocracy, where the rich capture much of the resources. That, in turn, may lead to populism and the destabilization of democracies. Economics suggests that the government plays a role in modifying market outcomes. Changes in allocation that increase the aggregate economic surplus are desirable (Pareto efficient) if the losers are compensated. However, we have situations where changes like globalization may improve overall GDP but worsen income distribution, which may cause destabilization of democracy.  Economics also suggests that the government must address market excesses, for example, by developing and enforcing regulations to control pollution. The government also has a role in maintaining and stabilizing the financial sector.  Trust in democracy wanes with the emergence of corruption. Failure of democratic governments to perform their responsibilities may pave the way to regime changes. Democracy is more likely to flourish in societies with a “Serving elite” and effective safety net policies.

Economists started the ICABR, and it has become multi-disciplinary over the years. This year, we had political scientists, engineers, lawyers, plant scientists, and policymakers. The diverse perspectives led to a more exciting and insightful discussion. Furthermore, we learned how much we depend on one another to build solutions. For example, designing precision technologies requires remote sensing and geographic information systems knowledge to monitor and follow activities on the ground and over time, climate, life, and soil science knowledge combined with economics to assess decisions under varying circumstances, engineering and agronomy to design techniques to implement these decisions, and economic law and political scientist to develop the legal and institutional set up that will enable adoption of the new technologies.  Each of us needs some basic understanding of principles guiding other disciplines- and we need to work together to develop integrated solutions. The ICABR will continue emphasizing multidisciplinary dialogues that will lead to collaborations. Our next meeting will be in Saskatoon, Saskatchewan. It doesn’t have the glamor of Ravello, but it is a beautiful city with a lovely river in the Canadian prairie, and believe it or not, I went there twice for vacation (my wife’s best friend lives there). It has a dynamic bioeconomy and a great museum, and the meeting will be exciting and fun. If you’re in the neighborhood, visiting Jasper and Banff may take a few more days. 

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