Grant McDermott bio photo

Grant McDermott

Data. Economics. Environment.

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Fields: Environmental and resource economics. Applied econometrics. Bayesian data analysis.

Interests: Energy markets and climate change. Water management. Fisheries policy. Uncertainty and Bayesian learning. The impact of environmental quality on market outcomes.

Working papers

Hydro power. Market might.

Hydropower is the world’s foremost source of non-fossil fuel energy. It is also characterised by a unique set of production features that greatly simplify economic questions related to firm behaviour and output. Here I exploit these characteristics, together with quasi-experimental variation in market power and rich firm-level data, to identify evidence of noncompetitive behaviour in the Nordic electricity market. Consistent with theory, I find that increased market power leads to a dynamic pattern of resource shifting. Dominant firms tend to withhold production during inelastic demand periods, which would enable them to secure higher profits. My results suggest that even our most advanced electricity markets may be susceptible to manipulation under relatively common conditions. (Link to paper.)

Sceptic priors and climate policy

Under review.

How much evidence would it take to convince climate sceptics that they are wrong about global warming? I explore this question within a Bayesian framework. I consider a group of stylised sceptics and examine how these individuals update their beliefs in the face of current and continuing climate change. I find that available evidence in the form of instrumental climate data already tends to overwhelm all but the most extreme priors. The resulting posterior distributions of climate sensitivity correspond closely to existing estimates from the scientific literature. The updated beliefs of most sceptics are thus consistent with a carbon price that is substantially greater than zero. However, belief convergence is a non-linear function of prior strength, so that it become increasingly difficult to convince the marginal sceptic. I conclude by discussing the general conditions for consensus formation under Bayesian learning, its relevance to our current policy impasse, and offer some remarks about finding common ground in the future. (Link to paper. Link to code.)

Works in progress

The value of bulk information in the age of search engines

With Christopher J. Costello and Michael B. Ward.

A broad class of economic decision problems involves searching over a collection of uncertain research leads. Existing search theory informs the efficient search over this pool using available information. But in many cases, the researcher has the opportunity to collect new information en masse, e.g. with a search engine or scientific framework, that will benefit the search. We derive the value of this type of bulk information, determine the general properties that render it large or small, and calculate its implications for economic innovation. We show that changes to the underlying characteristics of different search problems can yield surprising results. For example, more lucrative end-prizes can actually reduce the value of information, while the possibility of better information often suppresses innovation.

Protecting marine turtles, mammals and birds by rebuilding global fisheries

With Matthew G. Burgess and others.

Rebuilding target fisheries and protecting threatened bycatch species are central goals of marine conservation efforts. Here, we assess global tradeoffs and synergies between these two objectives. We compare: (i) changes in fishing pressure needed to achieve maximum profit from 4,713 target fish stocks—accounting for >75% of global catch—to (ii) estimates of changes in fishing pressure needed to reverse the ongoing declines of 20 sea turtle, marine mammal, and seabird populations threatened by fisheries bycatch. We project negligible tradeoffs between maximizing fishery profits and halting the declines in at least half of the bycatch populations in our sample. Tradeoff severity varies for the other populations. Our analysis suggests that improved management of commercial fisheries will yield substantial collateral benefits for threatened bycatch species.

The blue paradox: Preemptive overfishing in marine protected areas

With Christopher J. Costello and Kyle C. Meng.

More information coming soon.


Five rules for pragmatic blue growth

With Matthew G. Burgess and others. Forthcoming at Marine Policy. (Link to paper.)

Resolving disputes over ocean calamities

With Matthew G. Burgess. Published in BioScience, 65(12), 1115-1116, 2015. (Link to paper.)

Electricity prices, river temperatures and cooling water scarcity

With Øivind A. Nilsen. Published in Land Economics, 90(1), 131-148, 2014. (Link to paper. Ungated version here. Blog post here.)

Report chapters

South Africa Compliance Analysis

With James Morrissey and Davina Mendelsohn, in “Governing Global Climate Change: St Petersburg Compliance Report for the ‘G8 Plus Five’ Countries”, Maria Banda and Joanna Langille (eds.), G8 Final Compliance Report 2007, Oxford: G8 Research Group Oxford, 1 June 2007. xiii + 190 pp. (Link to report.)

The Current Status of the EPWP (Infrastructure) in the Western Cape

With Anna McCord, Kim Adonis and Lisa van Dongen. Prepared for the Western Cape Provincial Treasury & Department of Transport And Public Works CAPE. Public Works Research Project, SALDRU, UCT, 24 March 2006. (Link to report.)