Research Statement Ruslana Rachel Palatnik Climate change is a serious and urgent issue. There is now an overwhelming body of scientific evidence that human activity is causing global warming, with the main sources of greenhouse gases, in order of global importance, being electricity generation, land-use changes (particularly deforestation), agriculture and transport; the fastest growing sources are transport and electricity. The structure of the relevant economics must cover a very broad range, including the economics of: growth and development; industry; innovation and technological change; institutions; the international economy; demography and migration; public finance; information and uncertainty; and environmental and public economics generally (Stern, 2006). My main fields of interest are climate change economics, environmental policy evaluation, agriculture, economic modelling and econometric analysis. I am particularly interested in evaluating economic impacts of climate change on the national and the international level and effectiveness of climate change mitigation policies. My other interests lie in the analyses of water use, biodiversity and economic growth. •

Current Research

Computable General Equilibrium Analyses of Climate Change Impact on Mediterranean Economies I am currently working at the FEEM -Fondazione Eni Enrico Mattei in the Computable General Equilibrium Modelling and Policy programme on the FP6 project named CIRCE – Climate Change and Impact Research – the Mediterranean Environment. Within the project I have developed the Computable General Equilibrium (CGE) of the world economy, having a special focus on the Mediterranean economies. In due course, I will employ the model as a "common denominator" for the analysis of socio-economic impacts of climate change, allowing a comparison of the different effects and an evaluation of their importance and criticality. Climate Change Assessment and Agriculture In parallel to the project above, I work with Prof. Roson from the Universitá Cá Foscari di Venezia, Italy, on climate change assessment and agriculture in General Equilibrium models. Agricultural sectors have a vital role in understanding the economic aspects of climate change. Land as an input to the agricultural production is one of the most important links of economy and biosphere, representing a direct projection of human action on the natural environment. On the one hand, agricultural management practices and cropping patterns have a vast effect on biogeochemical cycles, freshwater availability and soil quality; on the other hand, the same factors govern the suitability and productivity of land for agricultural production. Changes in agricultural production directly determine the development of the world food situation. Thus, to consistently investigate the future pathway of economic and natural environment, a realistic representation of agricultural landuse dynamics on the global perspective is essential. Agriculture also plays an important role in emitting and storing greenhouse gases. Agricultural sectors can contribute significantly to the portfolio of policy measures to combat global warming. For an efficient and cost-effective climate policy it is therefore important to explicitly include a detailed representation of the agricultural sector and land use as well as non-CO2 greenhouse gases (GHG) in economy-climate models. Critics argue that the CGE models are overly simplistic and do not capture many important characteristics of the agricultural economy. They also argue that the CGE parameters need more

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solid econometric foundations. My aim is to improve the representation of the agricultural sector in general equilibrium models. I will present the preliminary results of this study at the International Conference on Policy Modeling – EcoMod2008 – which will take place in Berlin on July 2-4, 2008. The Economic Impact of Water Supply Water problems are typically studied at the level of the river catchments. About 70% of all water is used for agriculture, and agricultural products are traded internationally. A full understanding of water use is impossible without understanding the international market for food and related products, such as textiles. The water embedded in commodities is called virtual water. In collaboration with Prof. Roson and Dr. Bosello from the Fondazione Eni Enrico Mattei, Italy, I attempt to investigate the role of water resources and water scarcity in the context of international trade. In this research I construct a computable general equilibrium model, especially designed to account for water resources and illustrate its potential application for sustainable water supply uses. •

Future Research Goals

Economic Impacts of Biofuels I have coordinated the submission of a research proposal for a Collaborative Project on Economic Impacts of Biofuel Use to Mitigate Climate Change to the EU commission 7th Framework Programme on Research, Technological Development and Demonstration (submitted on February 26, 2008). The proposed project aims to provide a detailed analysis of large-scale implementation of biofuel programs which have profound global economic, environmental, and social consequences. In January 23, 2008 the EU Parliament published a directive “On the promotion of the use of energy from renewable sources” which includes a 10% binding minimum target for biofuels in transport to be achieved by the year 2020. Therefore, it is becoming increasingly certain that agriculture will become a significant supplier of energy along with food. The main contribution of biofuels will be in providing energy that is renewable, less carbon intensive than oil, and can be produced domestically by most countries. However, biofuels, albeit efficient under the climatic point of view, are generally more expensive than their fossil counterparts thus requiring public support. In addition, they compete on a scarce land with other crops. Thus, any substantive development of biofuels is likely to lead a rise of food prices, which would affect negatively mainly developing countries. Eventually, rebounds on energy prices and demand might be experienced. Current studies do not provide much insight into how alternative bioenergy production scenarios could change global agricultural production nor the incomes of affected groups. This project aims to develop a realistic assessment of the economic and environmental impacts of regional and global policies designed to stimulate biofuels production and use. The expected effects will be highlighted at the international, national and sectoral level. Even though EU economy and policy goals are under specific focus of the project, the wider impacts on non European economies will not be neglected. This international collaborative project will be implemented by a consortium of 4 partners from Israel, Italy, Germany and Spain. Assessing Climate Change Impacts: A Dynamic CGE Modeling for Israel In my PhD thesis, carried out under the supervision of Prof. Mordechai Shechter, I have quantified the economy-wide consequences for Israel of meeting the targets of the Kyoto Protocol, employing a static CGE model of the Israeli economy. Initially, to this end, I constructed a social accounting matrix (SAM) (Palatnik and Shechter, 2008). The aim of this future study is to quantify the economy-wide consequences for Israel of meeting the targets of the Kyoto Protocol, employing a dynamic CGE model of the Israeli economy with bottom-up information on abatement techniques. 2

This information will be used to ensure a proper assessment of the direct and indirect economic costs of environmental policy in Israel. The efficacy of decentralized economic incentives for GHG emission reduction, such as carbon taxes on emissions and auctioned emission permits, will be assessed in terms of their impact on economic welfare. The dynamic CGE approach that will be applied in this research is adopted for the first time to the Israeli economy and should contribute to better informed debate on environmental policy in Israel. Sustainable development In collaboration with Climate Change Modeling and Policy team of the Fondazione Eni Enrico Mattei, Italy, I intend to provide a forecast of sustainable growth of the world economy analyzing various sustainability indicators using a global CGE model. This approach is innovative as it aims at evaluating the sustainability of various future growth paths of the world economy, whereas existing studies mainly analyze the sustainability of past growth paths and/or focus on national or regional economic development. Biodiversity and Climate Change A dominant element in recent discussions about sustainable development is worry about the loss of biological diversity (or biodiversity). Biodiversity requires our attention for two reasons. First, it provides a wide range of direct and indirect benefits to mankind, which occur on both local and global scales. Second, many human activities contribute to unprecedented rates of biodiversity loss, which threaten the stability and continuity of ecosystems as well as their provision of goods and services to mankind. Consequently, in recent years much attention has been directed towards the analysis and valuation of the loss of biodiversity. Voices suggesting to build up proper protection mechanisms for unique and scarce diversity become louder. The question emerges whether, and which combination of ecological and economic insights can help us to better understand the available policy choices and to map out proper roads towards the future. In cooperation with Dr. Bosello and Dr. Nunes from the University of Milan and Fondazione Eni Enrico Mattei, Italy, I mean to assess the economic costs of climate-related biodiversity losses using CGE modeling and micro-econometric valuation tools. Ultimately, this study aims to contribute to a better basis for public decision making regarding biodiversity protection. References Palatnik, Ruslana and Shechter, Mordechai 2008. "Can Climate Change Mitigation Policy Benefit the Israeli Economy? A Computable General Equilibrium Analysis". FEEM Working Paper No. 2.2008 Available at SSRN: http://ssrn.com/abstract=1086316 Stern, Nicholas 2006. The Economics of Climate Change: The Stern Review, H.M. Treasury, U.K.

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