Typically socioeconomic benefits and environmental externalities are left out of economic analysis, mainly because of the difficulty in measuring those factors.

The World Bank has created a new macroeconomic modeling framework that gives us the ability to measure several aspects socioeconomic benefits and environmental externalities that weren’t possible before. With the new modeling tools the benefits of reducing emissions can be measured, projects and policies can be designed and analyzed better, and a rationale for combining climate action with sustainable development can be provided.

Based on seven simulated case studies the new framework can be used to calculate the impact and benefits of reducing air pollution. Three of those seven studies deal with sector policies. Included in the policies are taxes, regulations, and incentives. The policies aim to create more clean transportation, industrial energy efficiency, and energy efficient appliances.

They are estimating that through the implementation of these policies about 30 percent of the reduction necessary to limit global warming to 2 degrees Celsius by 2030 could be accomplished. It’s staggering to think the policies would save 16 billion kilowatt-hours of energy, which is the equivalent of taking 2 billion cars off the road

The four simulated project studies looked at local development interventions and then scaled those to a national level.

One study showed the possibilities using an example of a landfill in Brazil that integrated waste management options, like biodigesters, composting, and methane capture for electricity production. If those same methods were scaled to a national level for a 20 year period, they estimate that over 44,000 jobs would be created. These jobs would add over $13 billion to the GDP, while drastically reducing emissions.

The other case studies also showed promise. In India they looked at increasing bus rapid transit, in rural China the impact of clean cookstoves, and in Mexico the use of solar panels.

The estimated benefits of the fours studies combined created some incredible figures. They estimated that 1 million lives would be saved and 1-1.5 million tons of crop losses would be prevented. The financial implications of the projects in India, Brazil, and Mexico alone would equate to over $100 billion.

When you take these studies into account it’s easy to see the great benefits that can be obtained through climate-smart development.

This past Saturday was the World Blood Donor Day campaign. This year’s motto was “give blood for those who give life.” World Blood Donor Day is put together by the World Health Organization.  There are nearly 800 women who die each day from childbirth-related complications. During the delivery process and after child birth severe bleeding causes the majority of mortality, morbidity and long-term disability. The “give blood for those who give life” campaign aimed to increase awareness about the importance of timely access to blood products for all countries. This campaign is a portion of a comprehensive program put together by the World Health Organization’s approach to the prevention of maternal deaths.

The World Health Organization primarily targeted donors who regularly give blood and healthy people who would be eligible to give blood, but have yet to do so on a regular basis. They also encouraged countries, organizations and international partners that are focused on blood transfusions and maternal health to create a plan that would highlight the needs that currently exist.

The numbers that are associated with the existing needs are staggering. Severe bleeding contributes to 34% of maternal deaths in Africa, 21% in Latin America and the Caribbean. The World Health Organization strongly supports improving access to blood for women and children.

To learn more about this annual event visit the World Health Organization site.

The idea of pricing carbon isn't a new one.

In the world today there are around 40 countries as well as 20 cities than have plans or are currently using carbon pricing mechanisms. The regions mentioned account for nearly 25 percent of the globes emissions. In addition to the aforementioned regions there are many more that are creating systems to place a price on carbon in the not-so-distant future. Combining these two faction would cover roughly half of the CO2 emissions around the world.

Carbon pricing has two common forms. One is emissions trading systems, or ETS, and carbon taxes

ETS

Emission trading system are often referred to as a cap-and-trade system. In an ETS system a cap is set for the total level of greenhouse gas emissions. Then those who are under the cap are allowed to sell their allowance to the larger emitters. This creates a supply and demand for emissions and establishes the market for greenhouse gas emission pricing. Having a cap in place forces to stay within the limits or purchase the allowance of others.

Carbon Tax

Placing a tax on carbon is a much simpler tactic. A price for carbon is set with a defined tax rate on emissions or the carbon content of fossil fuels. This varies from an ETS because the reduction in emissions is not predetermined.

The strategy that is employed should be weighed by the national and economic circumstances.

Pricing carbon can also be done indirectly with things like, fuel taxes, fossil fuel subsidy removal and regulations. It's worth noting that The World Bank Group has reviewed best practices for carbon pricing and is creating their own process that weighs all of the key factors, including global impact.

The question about the impact of raising tax on tobacco is fairly common. In the Phillipines they successfully raised the taxes even with the strong opposing force of the tobacco industry.  The idea was pressed forward by President Franklin Drilon, who felt that increasing the tax on tobacco would aid the government's health agenda and combat the high occurrence of smoking that was taking place in the country.

In the Phillipines they were able to communicate a strong media message from their Department of Health and Finance that informed the general public of the health benefits that would go along with the implementation of the bill. They were able to label it as anticancer tax to the public. Stating that it was fair to tax the tobacco industry based on the health burdens that are created by smoking.

A year after the tax was implemented the government in the Phillipines was able to collect more than they had expected. 85% of the revenue that came in has been allocated to universal health coverage and the improvement of the health care facilities available to the people of the Phillipines.

Which brings us to the topic of discussion. It is widely believed that raising the tax on tobacco is the most effective solution to reduce tobacco use. With what has taken place in the Philippines serving as evidence to that point as well as similarly effective legislations in countries like Egypt, France and Turkey.

The difficult part about raising the tax on tobacco is outlining the benefits from a health and economic standpoint, as well as dismissing the myth that a tax will lower the tobacco sales. It is important to note that the single largest cause preventable death is smoking. Smoking kills nearly 6 million people each year. It not only impacts life expectancy, it also impacts quality of life.

Raising the Tax

Most people understand tobacco is harmful, but many think that raising the tax on tobacco would be harmful too. The idea behind the tax is to raise the price above inflation rates and hope that people will buy less tobacco do to the price increase. If you were to raise the tax in such a way that it would increase the overall price of tobacco by 10% it is estimated that it would reduce tobacco consumption by 4-5% depending on the income levels of the country where it is implemented.

The World Health Organization projects that if you were to raise the tax on tobacco by 50% that the number of smokers would decrease by 49 million. By having 49 million fewer people smoking they also project that you would be able to avoid 11 million deaths from smoking.

To go along with the clearly immense health benefits that come with raising the tax on tobacco you also have the new revenue stream for the government. Creating a win-win situation. There are a lot of economic and health factors at play, but the studies that have been done indicate raising the tax would be a strong positive from a health and economic perspective.

The European Central Bank took several courses of action to combat low inflation. They lowered the main lending rate from .25% to .15%. Beyond that they became the first big central bank to move to negative interest rates by lowering their deposit rate from 0 to -.1%. They also announced that these new measures will aid struggling businesses by giving them inexpensive long-term funding to banks that support through the duration of their loan. This was designed to promote a recovery that wouldn't rely so heavily on Germany.

Prior to the changes German annual growth of 3.3% was all that was keeping the economy from shrinking in the first quarter of this year. The german rate is expected to slow down, but the overall economy in the next two years is expected to grow by nearly 2%. Which is what it has done since the start of the european crisis in 2010.

Since 2006 Germany's surplus has averaged nearly 7% GDP, even reaching a high of 7.5% in 2013. Maintaining that level is impressive because their main export market is the rest of the european market that has been suffering. The surplus of the other european members dropped to 2.1% in 2013. They have sustained the levels in Germany by reaping the benefits of the emerging markets in need of machinery and transport goods.

Employment in Germany reached has steadily risen the last ten years and is at its highest point since 1990. The unemployment rate has dropped from 11.4% to 5.2%, which constitutes the second-lowest rate in the European Union.

The rise in employment has positively impacted tax revenues. Low long-term interest rate have allowed lower borrowing costs on government debt. Combine the two and you have a public finance system that is blossoming. The budget ended up with a surplus in 2012 and then this past year the national debt dropped to less than 80% of the GDP, which is the first such occasion in the past 5 years.

We've spoken on the strengths, but the long-term prospects are troubling due to a number of key factors. For starters their birth rate has been below the replacement rate and the nearly 400,000 people per year that migrate aren't enough to counter the issue. The other option to counteract the effects of a birth rate below replacement rate is a high productivity growth, but even substantial productivity growth would fall well short.

Even with their imposing current-account surplus, it can be interpreted as a sign of weakness, since it represents a shortfall of domestic investment in relation to national saving. Total investment has fallen from 21.5% of GDP in 2000 to 17.2% in 2013. The government is not only investing too little in new infrastructure but also spending too little on maintenance.

The three main factors of success that have been propelling India’s growth are demographics, globalization and reforms. In the last decade the GDP growth for India has seen a significant jump from the previous two decades. India has averaged 7.6% growth in the last ten years, compared with 6.1% in the 1990’s and 4.6% in the 1980’s.

This trend combined with an adverse global environment, poor macro policy choices of pursuing high fiscal deficits, strong rural wage growth and policy inaction did however, cause the credit crisis in 2008.

Over the course of the last couple years, the Indian policymakers have taken note of the impact policies have on the economy. The adjustments have been very effective with exchange rates and interest rates. They have taken steps to improve the business environment as well as improve the external environment and the changes are starting to have some real positive manifestations.

The expectation is that India will transition from their current growth rate into a more comfortable rate somewhere closer to 6%. There will be structural challenges that present themselves over the next decade. The strong growth in the working-age population, reform to aid productivity and accelerating productive job opportunities, income and saving will be strong enough to support India’s growth trend.

Improvement in demographics has been a major source of higher potential growth. Favourable demographics provide a platform of surplus labour that the economy could mobilize.

To read more on India’s Potential click here.