Monday 10 September 2012

Debating climate change: The need for economic reasoning

The global climate change debate has gone badly wrong. Many mainstream environmentalists are arguing for the wrong actions and for the wrong reasons, and so long as they continue to do so they put all our futures in jeopardy.

My diagnosis is a twofold ethical failure: of pragmatism and perspective (or, more eloquently, of ‘sense and sensibility’). Many environmentalists argue that climate change is fundamentally a values problem. And yet their interpretation of this has taken a narrow moralising form that systematically excludes consideration of such important ethical values as improving the lives of the 1 billion people presently living in unacceptable poverty or even protecting other aspects of the environment (such as wilderness areas). That narrowness also leads to self-defeating policy proposals founded almost entirely in the economy of nature rather than political economy. The result is a fixation on global CO2 levels alone as the problem and solution, at the cost of systematic and broad evaluation of the feasible policy space.

These foundational errors have induced a kind of millenarian meltdown in many otherwise sensible people, to the extent that to be an environmentalist these days is to fear the oncoming storm and know that all hope is lost. To put it mildly, people in this state of mind are not well placed to contribute helpfully to the political debate about what we should do about the fact of climate change. In their reconciliation with despair environmentalists are not only mistaken, but display a disturbing symmetry with those opponents of action who are mistakenly complacent about the status quo. My recommended treatment, to reinvigorate their confidence as well as their ethics, is a dose of economic reasoning.

It is clearly a scientific fact that the world's regional climates are changing substantially and at unprecedented speed as a result of the global warming  produced by the greenhouse gases emitted by human activity (in particular by the industrialisation of the West). But 'science' does not have the legitimacy or resources to tell us what we should do about climate change. We have to work out for ourselves, through public reasoning and politics, the implications of scientific facts for what we have reason to value, and what to do about them. As well as incorporating the full range of our ethical concerns and values (sensibility) such a debate requires further facts about how our socio-economic institutions interact with the environmental mechanisms (sense). Relying on the natural scientific account alone leads us to fixate on the minutiae of greenhouse gas emissions levels and climate sensitivity, while drastically simplifying the human side.

It is often said, and very plausibly, that climate change is difficult for human minds and political institutions to grasp and act on because its global scale and long-term (inter-generational) and complex causal mechanisms present a 'perfect moral storm' (e.g. Stephen Gardiner). One way of dealing with such difficult problems is to moralise them, and this seems to be the strategy currently favoured by mainstream environmentalists. Climate change is thus simplified and personalised as a simple ‘values’ choice: Are you for the planet or against it?

Morality in this sense concerns strict but simple universal rules that everyone should follow without regard to personal situations or consequences - on the model of laws. On this model, one's carbon footprint is a moral crime (against the planet presumably) which one should feel guilty about and strive to reduce. As of course are other people's carbon emissions: they deserve to be shamed or otherwise forced into submission by the righteous ones.  Hence the competitive carbon austerity in some parts of the environmental movement. Hence also the sneering at SUV drivers and Arizonans with swimming pools. Forging such a moral identity may strengthen solidarity within the environmentalist movement, but it certainly doesn’t build the necessary bridges for successful political action.

In trying to tackle climate change by directly dealing with the causal mechanism of CO2 levels we have mistakenly framed the situation as an enormous collective action problem - how to persuade 7 billion people to adopt the new morality of carbon rationing (and prevent free-riding). Everyone who thinks this through recognises that it is impossible to realise without enormous government coercion (severe rationing along the lines of China's one-child policy). That requirement explains the antipathy to democratic principles of many climate change warriors (such as James Lovelock): it seems easier to persuade all 200 national governments to adopt carbon authoritarianism than to persuade all those people individually. However even the government coercion approach fails - see the failures of every inter-governmental treaty, from Kyoto to Copenhagen - and the reasons are obvious.

The moralisation approach undermines itself since it frames climate change narrowly in terms of righteousness. Inevitably deliberation about action gets bogged down in an interminable blame-game about what justice requires - who had their industrial revolution first, etc. Furthermore, the moral duties of different actors do not all point the same way: poor country governments have a clear and over-riding moral duty to help their citizens achieve the quality of life and prosperity which the West takes for granted, and which is inevitably energy (i.e. carbon) intensive. And then there is the practical economics: the world still has lots of coal, a lot of it in poor countries like India, that can produce electricity very cheaply. Not even the strongest moral rhetoric can make renewables competitive without radical technological (i.e. price) breakthroughs.

No comprehensive global political solution to greenhouse gas emissions is possible. We need to go back and think again.

The moralisation approach contrasts with a fuller ethical thinking in which values are considered and debated explicitly and openly. Righteousness simplifies but it doesn't try to understand. No-one emits carbon deliberately 'for fun', but rather we engage in activities which are more or less valuable to us - such as flying across the Atlantic to visit grandparents - which happen to emit carbon as a byproduct. To ignore the value of these human activities and see them instead as moral crimes is to do a violence to the very humanness of the lives (including those of future generations) that we are supposed to be so concerned about preserving. The single-minded focus on carbon reduction even distracts us from protecting other valuable parts of our environment, like the wilderness areas that would be industrialised with biofuel plantations, dams, and windmills. We need a broader ethical debate about what the consequences of climate change will be for what we humans have reason to value (e.g. polar bears - not that important; changes to the South Asian Monsoon - very important) so that we can take really credible actions to protect them.

Perhaps surprisingly, such a fuller ethical analysis can benefit greatly from economic reasoning and tools. Economics is often supposed to be cold and heartless. Certainly it has more in common with engineering than moralising. But sometimes a hardnosed logistical approach is helpful, and economics is actually very good at addressing and demystifying complex problems involving multiple agents with divergent interests that cannot all be satisfied i.e. our 'perfect moral storm' [previously]. Its contribution is twofold: numbers and values.

First, economic analysis uses quantitative methods to disaggregate the different causal mechanisms in play (such as different sources of CO2 equivalents) and different effects on social welfare (such as the impact of more frequent extreme weather on cities and agriculture). Then it constructs models focussing on the most significant mechanisms and uses the models to test alternative policy proposals for their costs and benefits to social welfare. That allows us to map the likely effects of different policy measures and mixtures, including their unintended (but predictable) consequences. In this role, environmental economics complements the natural scientific analysis about how the world works by incorporating the working of the political-economy. It deserves its place in the IPCC reports because it gives us a better sense of proportion for policy purposes: What interventions might work and how significant would they be? It deserves a similar place in the rhetoric of the environmentalist movement.

Second, economists understand social welfare to include other things we value besides those related to climate. That is because they naturally think in terms of comparative priorities rather than absolute value. While environmentalists focus on identifying the terrible badness of climate change and then argue for minimising CO2 emissions to prevent it, economists understand that our priorities are relative. We have other values and concerns - such as for quality of life, wilderness preservation, individual freedom, and fairness - that need to be incorporated into the analysis so that we can make a sensible allocation of our limited resources among our goals. Economists point out that the full cost of spending on climate mitigation is the loss of all the other things we could have done with those resources, from eliminating tropical childhood diseases to guaranteeing worldwide access to a decent education. It is easy to criticise the way that economists try to calculate this social welfare by putting precise numbers on social values. But their underlying multi-dimensional and demotic ethical perspective is a real advance over the impoverished moralisation view.

Such an economic analysis suggests different packages of policy bundles (not only markets for carbon) that would follow from the different values we assign to different aspects of social welfare, as well as incorporating the degree of uncertainty remaining in the science and political-economy of climate change.

This is an essentially pragmatic approach - breaking the 'end of the world' into human-sized and human-relevant problems and solutions and ordering them by their importance, feasibility and (opportunity) costs. It builds on the fact that while the central causal mechanism behind global climate change is greenhouse gas emissions (important to understanding and modelling the phenomenon itself), solutions need not directly engage with that causal mechanism in the short term. After all, it is the effects of climate change on the things we care about that are important, not some abstract CO2 molecule count. We do not need to fixate entirely on CO2 emissions when other options exist to mitigate the effects of climate change that actually concern us, and seem much cheaper and more effective. i.e. we can trade off some level of climate change we can live with against the excessive costs and implausibility of seeking to end all carbon emissions immediately. For example low-lying places such as Bangladesh or the Maldives are at particular risk from rising sea-levels, but piecemeal interventions like building sea walls are not only cheaper but much more likely to protect them than global carbon austerity.

The science of climate change does set the parameters of the problem, even though it doesn’t dictate the correct solution. The greenhouse gas build-up cannot be wished away by the kind of pragmatic, social choice guided exercise I have been recommending. It must be dealt with in the medium term, but through the structural transformation of our carbon economy rather than global austerity. That will include both developing scalable technologies for removing CO2 from the atmosphere (such as genetically modified algae and trees) and reducing the carbon intensity of our high energy life-styles (for which we already have some existing technologies, such as nuclear power). But note that such innovations require no prior global agreement to set in train, but can be developed and pioneered by a handful of big industrial economies acting on the moral concerns of their own citizens.

A high price on carbon in a few large rich countries (preferably via a non-regressive carbon tax) supplemented with regulations where market forces have less bite (e.g. to force the construction industry to develop more energy efficient methods and materials) and research subsidies would provide the necessary incentives. Nor would these innovations require global agreement for take-up since they will be attractive on their own merits (clean, efficient, cheap). Developing countries burn dirty coal because it is cheap and their people need electricity. They don’t need a UN treaty to tell them to use cleaner technology if it is cheaper; but neither would they sign up to such a treaty if it were more expensive.

The pragmatic approach does not depend on reaching an impossible global agreement on a perfect solution requiring moral or political coercion. Instead it offers feasible paths through the moral storm while respecting the existing interests and values of the human beings concerned. It is more democratic than the moralising approach because it works within our existing political institutions (no need for a 'global government') and offers transparent arguments for action within our present valuational framework (rather than requiring us all to assume a new and narrow set of values). It is also fairer. While the moralists' fixation on minimising further CO2 emissions places excessive burdens on the world's poorest, the pragmatic approach naturally pushes the greatest obligations and costs onto those (rich countries) most able to act.

At present too many environmentalists are guilty of the same moral and cognitive melt-down in the face of its complexities that they accuse their detractors of. They are wrong to see the development of human freedoms and well-being (prosperity) as a distraction or even a threat to the world. They are wrong to fixate on an abstract and impossible problem (450 CO2 ppm) and seek a perfect solution without reference to wider ethical issues, and political and practical feasibility. They are wrong to give up on the potential of democratic politics and human ingenuity and settle for Malthusian doom mongering and moralising.

Note: This is a substantially revised version of a year old post, Ethics and Global Climate Change.