A study by researchers in Canada and Sweden that sought to average and rank the impacts of various individual actions on reducing greenhouse gas emissions has been making the rounds on the Internet lately (link to PDF), notably for its headline finding that the single biggest action that one can take to reduce your personal carbon footprint is to have fewer children (average ~60 tCO2 equivalent avoided per year). After that, the biggest actions one can take are to live car free (2.5 tCO2e/year avoided), or avoid one transatlantic flight (1.5 tC02e/year avoided). Common “sustainable” actions like upgrading lightbulbs and recycling don’t make much of an impact, according to the analysis (see the figure taken from the study below for more). Does that mean that having children is incompatible with support for environmentalism and sustainability? I would argue that it doesn’t, for a number of reasons that range from issues with this particular analysis to considering how we should think about climate change and demographics more generally. Figure 1 A comparison of the emissions reductions from various individual actions. The height of the bar represents the mean of all studies identified in developed nations, while black lines indicate mean values for selected countries or regions (identified by ISO codes) where data were available from specific studies. We have classified actions as high (green), moderate (blue), and low (yellow) impact in terms of greenhouse gas emissions reductions. Note the break in the y-axis. Recently, demographers found that the fertility rate in the United States is already at an all-time low, largely because young women (15-24) are having fewer babies, and this is not offset by increases seen in fertility rates for women over the age of 30. A similar pattern exists throughout the rich world, with fertility rates generally lower in Europe and East Asia, and below replacement rate in many rich countries. However, in the United States and much of Europe, immigration offsets low fertility rates and means that these countries’ populations are still growing. None the less, there is a looming demographic crisis globally. The United Nations projects that the global population will increase from about 7.4 billion in 2015 to 11.1 billion by 2100, with no overall decline in sight. Virtually all of that increase occurs in low- and middle-income countries whose populations between 2015 and 2100 increase from 642 million to 2.5 billion and 5.6 billion to 7.4 billion, respectively. One striking projection to put things in perspective is that by 2047, Nigeria will have a larger population than the United States, with the former growing from 181 million in 2015 to 387 million in 2047 and the United States growing from 320 million to 385 million in that time. While those outside of rich countries have a far, far lower environmental impact (more on this below), such a population increase would no doubt be an ecological disaster with strained water resources, difficulties in producing food, loss of biodiversity and habitat loss. Of course, the areas that will see the largest population growth will also see disproportionately large impacts from climate change. All of this suggests that global society needs to think seriously about reducing population growth, and rich countries should certainly stop subsidizing people for having children. However, campaigns that seek to guilt rich people into having fewer children voluntarily would likely be ineffective and inefficient. First, let’s think about what such mass choice would actually look like. Let’s assume that a lot of people are persuaded by this argument and stop having children, with some perhaps adopting instead. Let’s also assume that this process is non-coercive (we’re not going with the one-child policy here). Such a decision would have to be made literally hundreds of millions of times in order to have a serious impact. I’m more skeptical that this, or any other voluntary action, can occur on such a scale. Additionally, the very framework of simply comparing a decision not to have a child with other voluntary actions seems somewhat flawed. If we are comparing actions we can take to reduce emissions, of course the best thing we could do to reduce our impact is to simply not exist – the result from the study is trivial in that sense. By not having a child, you are not, for instance, adding a car to the road or having another passenger on all of those transatlantic flights. Further, as David Roberts at Vox points out, the budgeting behind comparing decisions about childbirth to those surrounding recycling are a bit strange. While I can be held responsible for my decision to recycle or not, am I somehow held responsible for the emissions of children that I decide to have or not? Are my parents ultimately responsible for my emissions? Are their parents responsible for their emissions? If my children are responsible for their own emissions, then it may not be fair to stick me with their carbon footprint. If I am responsible for their emissions, then why can’t I blame my actions on my parents, in turn? Further, while I can pat myself on the back for making the decision to recycle and eat a mostly plant-based diet, should I credit myself each year for not having another child? Another issue with the study is that the avoided emissions calculated are average for rich countries; note that the actual country levels vary significantly in the chart above. Within a country like the United States, the rich have a much larger carbon footprint than the poor. Does that somehow make a poor person’s decision to have children more morally acceptable than a rich person’s? Ultimately, however, such a focus on decreasing the fertility of an already low-fertility group like the wealthy seems misplaced. Evidence suggests that there is ample room for population reductions that can be completely non-coercive, and other, coordinated actions that can help solve the global climate problem. The Drawdown Project, which seeks to rank climate solutions by efficiency, notes that combined actions of encouraging family planning and educating girls in poor countries can lead to greater emission reductions globally than any other single class of action such as the widespread deployment of onshore wind turbines, having people switch to plant-based diets, reducing deforestation, or building massive solar farms. Specifically, the family planning and girls’ education policies recommended would reduce global emissions by 119.2 gigatons of CO2 equivalent. In the framework of the other study, that’s like 2 billion chosen avoided births, though, admittedly, these avoided births would occur in countries where per-capita emissions are low. Still, this is a massive scale, and such programs are incredibly inexpensive, making them a very efficient way to reduce emissions. Importantly, too, they are a non-coercive way to reduce population growth where it would be greatest. Even in the United States, the CDC found that 13.4% of pregnancies between 2011 and 2015 were said by mothers to be unwanted. More fully addressing family planning needs in the US, then, could even make an impact without convincing people to forego having their own children. One should note, however, that now our discussion has moved away from individual choices and towards policies and institutional actions. In the courses that I teach on environmental issues in economics, I have often encountered students with a zeal for encouraging voluntary actions to reduce environmental damage. But a fundamental message of economics is that, especially with a global problem like climate change, voluntary actions will never be enough. The fundamental problem is that greenhouse gas emissions are not appropriately priced and/or regulated. It is simply an impossible problem to solve without institutions (I should note that Roberts also points this out in the aforementioned article). Overpopulation is also a global problem. It is clear that many people around the world have children that they do not wish to have, or they would make different choices about children if their economic situations were improved. Perhaps the best and most efficient use of our time and energy in combatting climate change and ecological problems caused by overpopulation, then, is to rally in support of candidates and policies who want to do something about this and to push for broader acceptance and support within the population of climate change and overpopulation as serious issues. The policies and political will that will be needed to seriously solve these problems are, I think, typically underestimated (look here for a nice quick article on the kind of actions we are looking at to have a decent shot at avoiding disastrous levels of global warming). I largely view the preferences of most people to have children or not to be relatively fixed and not worth the effort that it would take to change minds on the scale needed for serious change. I am also wary of any campaign that tries to explain to women the appropriate thing to do with their bodies. But the notion that someone isn’t a serious environmentalist because they wish to have children seems wrong (and judging someone harshly for deciding not to have children for environmental reasons also seems wrong!). I, for one, will gladly support policies that will reshape the economy and reduce emissions on a per-capita basis by much more than any choice I could make to not have children. After all, preserving nature as much as possible for my offspring and all members of future generations is a large part of my motivation for the work that I do.
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Reaffirming the US commitment to the Paris Agreement was always a longshot under the Trump Administration. None the less, I held out hope that the overwhelming arguments in favor of maintaining participation in the agreement would prevail. This was clearly naïve on my part. The president has announced that the US will stop participating in the nonbinding agreement, which will take four years to formally exit (one small silver lining: the US is not pulling out of the underlying United Nations Framework Convention on Climate Change, which would have been a more extreme step). Naturally, I am despondent at the news, though setbacks are sadly a part of following climate policy developments. So I wanted to write up a quick take on what this means and why it is a terrible idea. The US is the largest historical contributor to the problem of global warming. The evidence is very clear: the United States has released more greenhouse gas emissions than any other country historically. That is, the country became rich in large part through the burning of fossil fuels without taking into account their contribution to environmental problems like global warming. One could correctly argue that this accumulation of wealth has not benefited everyone equally, though the distributional issue is a separate question in this case. The United States was the largest contributor to global warming, and therefore it should make the sharpest reductions in greenhouse gas emissions. Doing so does not mean we are being taken advantage of by other countries. On the contrary, not reducing means that we are essentially forcing other countries to reduce more than their fair share. While that may be precisely Trump’s point, it is a shortsighted strategy in any case. It is likely that other countries will attempt to reduce cooperation with the United States on other international issues, and there is a remote possibility that countries could ban together to impose carbon tariffs on US goods (which are legal under WTO rules). The fossil fuel industry and its allies have been most successful at having Americans question the scientific consensus on anthropogenic climate change
Let me be clear: climate scientists are virtually certain that the climate is warming because of human-caused emissions of greenhouse gases. There is no serious dissent within the climate community. A 2016 article finds that 97% of climate scientists agree that humans are causing global warming. Multiple studies find that those very few (less than 3%) who do question anthropogenic climate change demonstrate less subject matter knowledge than those who do not. There is no serious debate within the scientific community about this. However, the public is less convinced. The Yale Program on Climate Change Communication, which regularly surveys people in the United States on questions of climate change and energy policy, finds that 70% of adults agreed in 2016 that the climate is getting warmer, though only 53% believe that humans are causing that warming. However, only 49% of adults agree that most scientists think global warming is happening, and 71% trust climate scientists about global warming. Further, only 40% of American adults think that global warming will harm them personally. All of these numbers vary drastically by states, according to patterns that one might expect. This represents the success of a campaign of misinformation and promotion of conspiracy theories by the fossil fuel industry and its allies over several decades. Leaving the Paris Agreement will not bring back coal jobs. One campaign promise made by Trump that garnered much attention was a promise to bring back jobs in the coal industry. While roughly 180,000 Americans were employed in coal mining in 1986, today, about 50,000 are. That is fewer people than employed by Arby’s nationwide, and it is far fewer than the 260,000 people employed by the solar industry or the 100,000 employed by the wind industry in 2016. Further, as I have explained elsewhere, nothing that Trump does is likely to bring coal mining jobs back. His own economic advisor recently admitted this. Trump sees international relations as a series of isolated zero-sum games. This is a terrible mistake to make. In his speech explaining the decision to leave the Paris Agreement, Trump argued that the treaty was a bad deal for the US and that we risk other countries “laughing at us.” A consistent theme in Trump’s vision of international relations, extending across views on NATO or NAFTA or Asian security is that if other countries benefit, the US must be losing out, somehow. Trump seems to be incapable of believing in a positive-sum game in which both parties benefit. He also seems to underestimate the extent to which parties, such as the Europeans, might genuinely care about climate change and be less likely to cooperate with the US because of this announcement. Trump has set the stage for undermining US leadership and action on a wide variety of issues because of this. What happens next is anybody’s guess. From here, several things could happen. The rest of the world could unite on stronger climate action and isolate the US here, penalizing it on other issues. Or, key emitters like India and China could decide that it’s not worth making serious reduction commitments when the largest historical emitter is unwilling to take this seriously. Landslide losses for the GOP in 2018 could lead to a Congress willing to force the administration to take the issue seriously, and a loss by Republicans of the White House in 2020 could lead to re-engagement on the issue of climate change (though the world will be rightly wary of signing up for more action with the US if they suspect it will abandon any commitments it makes once the GOP regains the presidency). With the issue of climate change, time is of the essence. The longer serious action is put off, the greater the risk of catastrophic warming and the more expensive limiting global warming to any given level will become. To be sure, states like California, and major cities are and will continue to be committed to aggressive reduction goals. But the abandoning of any action on this issue by the federal government is nothing short of a moral and ecological disaster. In honor of climate denier and fossil fuel industry stooge Scott Pruitt being confirmed as the new Administrator of the US Environmental Protection Agency (EPA), I thought a little about how I would roll back EPA’s climate regulations. It isn’t simply a matter of deciding not to regulate greenhouse gas emissions; the agency is required to do so under the Clean Air Act as they have published findings determining that GHG emissions pose a danger to public health. There are a variety of ways to slow down enforcement of this that Pruitt will likely pursue. He can work with Congress to slash agency budgets. He can defer more to states to set targets and rules (or not set them). He can make sure that the defense of controversial rules in court by the agency are halfhearted – he sued EPA several times as Oklahoma’s Attorney General, so he should be familiar with this approach.
But I want to focus on the wonkier option that poses a longer-term threat: the social cost of carbon (SCC). This is the externality price that is associated with releasing a ton of carbon dioxide into the atmosphere, and it is used as a justification for setting important climate rules like the Clean Power Plan and vehicle emissions standards. I first realized that last December when a leaked memo from the Trump Administration Transition Team said that a goal was to “End the use of the social cost of carbon in federal rulemakings.” It claimed that “if the SCC were subjected to the latest science, it would certainly be much lower than what the Obama administration has been using.” That statement, by the way, is almost certainly false. If anything, the current SCC of $36/ton is much too low, but there are ways to make it lower. Typically, the SCC is calculated every 5 years by a group of relevant federal agencies, and the next time it is set to be reviewed is 2020. However, the guidelines for the review come from an executive order, suggesting that an expedited review could be mandated. Even if that happens, there are only certain parts of the SCC that can be controlled. Let’s consider how the number is calculated. First, agencies use the three major models of projected damages from climate change, known as Integrated Assessment Models (IAMs). These sophisticated models integrate climate and economic data, model their interaction, and project that interaction into the future to arrive at estimates for damages from climate change. The three major models, which are broadly similar but structurally a little different, are known as DICE, PAGE, and FUND. Because these models originate in academia, it would be very difficult to manipulate them for the purposes of changing the SCC. (I should also note that most climate economists believe that the SCC calculated by these models and the government is too low.) The interagency group determining the SCC runs a number of simulations with the three models, making slightly different assumptions about things like future economic growth rates or technology levels, and the output is an overall level of damage from climate change in the future. However, there are two key questions that must be answered at this point to determine the SCC, and these are the ripe points for manipulation. How much should we pay now to prevent damage from climate change in the future? And should we, in the United States, be willing to pay to prevent climate damage regardless of where it occurs on the planet? Starting with the second question, current approaches to calculating the SCC consider a dollar of damage from climate change to be the same, regardless of where it occurs. However, science tells us that a disproportionate share of the damage from climate change will happen in poor countries and near the poles. Given Trump’s proclamation of an “America First” energy policy, one could easily imagine a reevaluation making the case that only climate damages to the United States should be considered. That would shrink the overall damage number considerably and result in a much lower SCC. Given that poor countries that would receive a disproportionate share of damage have done little to create the problem of global climate change, there is an ethical argument to be made in favor of giving their damage more weight than damage in rich countries. The other element to be considered, our rate of time preference, can be similarly manipulated. The discount rate is a number used to quantify how much one is willing to spend now to gain a certain amount of money in the future. For example, using a 3% discount rate, I would conclude that avoiding $100 worth of damage in 50 years is worth $22.81 now. Using a 5% discount rate, however, I value the future less, so I would only be willing to pay $8.72 now to avoid $100 in 50 years. The current SCC evaluations consider a 2.5%, 3%, and 5% discount rate, but they use 3% as the primary estimate. If a 5% discount rate were used instead of a 3% discount rate, the current SCC would be $11/ton instead of $36/ton. Further, some economists argue for using a higher discount rate because this more closely matches rates of return in financial markets, which they argue represent people’s time preference. There are, however, a host of problems with that logic – namely, private markets may measure the time preference of individual rich investors, but that is probably a poor indication of group time preference or inter-generational time preference. The Stern Review, one of the most famous studies on the damages from climate change, used a discount rate of 1.4%. In the end, however, there is no “correct” discount rate – the question is essentially an ethical one about how much we should consider the well-being of future generations. Advocates of a high discount rate are effectively saying that they care little whether future generations are able to survive and thrive on the planet. Advocates of limiting damage considerations to the United States are going beyond a so-called “America First” philosophy to an “America Only” one. This would probably not lead to the end of all federal action on climate change, as new rules on regulating GHG emissions from power plants and vehicles would have to be written that take the new, lower social cost of carbon into account. But it is possible to manipulate that number in such a way that the government concludes that it is worth doing little to nothing now to prevent damages from climate change in the future. Doing so would be a gross negligence of our duty to both future and current generations, around the world and in the United States. Like most people, the results of the 2016 election left me shocked and surprised. But, given that my primary area of research has been the economics of climate change and clean energy, I’ve been trying to understand what impact the Trump administration will likely have on US greenhouse gas emissions trajectories and clean energy markets. I discount some of the actions the President-elect has taken that would suggest a moderation on the issue of climate change, like his recent meeting with Al Gore, in the face of the news that Oklahoma Attorney General Scott Pruitt will take over as Environmental Protection Agency Administrator (he is currently suing the agency over the Clean Power Plan). Additionally, his pick of South Carolina Governor Nikki Haley as UN Ambassador suggests that the US will indeed retreat from international efforts to reduce emissions. The very slight silver lining in all of this is that this probably does not mean that emissions in the United States will start to increase drastically or that markets for new wind and solar installations will collapse. However, at a time when policy needs to become much more aggressive in order to reduce emissions at a rate that will avoid catastrophic climate change, it will be moving in the opposite direction. Because the world has perhaps two to three decades to seriously begin to reduce emissions before very dangerous levels of climate change are locked in, this represents a serious setback. It will be even more difficult and costly to make up for this lost time later. Overall, I would expect generation from natural gas and renewables to continue their expansion under the Trump administration, and oil production in the US will likely increase (with significant environmental consequences for land that is opened for drilling). It is unlikely that coal generation will see a revival, however, despite Trump’s promises to bring back coal mining jobs. Much of the collapse in coal use has come from a combination of cheap natural gas and recent depressed demand from China. In many cases, coal is simply not a cost-effective fuel for power generation. Coal power plants take many years to build and are designed to last 50-75 years. Utility executives will be all too aware that an administration friendly to coal will almost certainly be replaced with one that seeks to phase it out over the coming years. When natural gas or renewable generation has similar or lower costs with much less risk of having to close plants early, it makes little sense to expand coal power generation or to defer plans to retire existing plants. Similarly, communities and workers suffering because of the collapse of coal will need help beyond hollow and false promises to bring their jobs back. The deployment of wind and solar power will almost certainly continue at a rapid pace in the US. Energy policy positions outside of climate change tend to be determined regionally instead of by party, meaning that there is support for production tax credits vital to the wind industry by representatives from places like Texas. Existing EPA rules are extremely difficult for the agency to roll back, and Republicans lack the 60 Senate votes needed to pass legislation to substantially change EPA authority to regulate things like greenhouse gas emissions (though Congress can de-fund offices in charge of enforcement and cripple the agency in other ways). However, clean energy markets should remain relatively healthy because, as the chart below from the Department of Energy shows, the costs of clean energy technologies fell drastically under the Obama administration. Source: Department of Energy
Outside of electricity generation, I would also expect businesses to continue to set and achieve clean energy and greenhouse gas emission reduction targets. About half of the S&P 500 has set emission reduction goals, and, as my research has found, for most companies, federal policy is only one of several considerations. I conducted interviews with executives at large U.S. firms about their process for setting goals, and my primary finding was that various stakeholder groups, such as consumers, activists, (state and federal) regulators, shareholders, and workers would typically prompt a firm to examine its production process. While the direct threat from federal regulators will be diminished under the Trump administration, threats from other groups remain. Shareholders, for example, may see this administration as an aberration and believe that it is not worth abandoning clean energy goals for short-term gains. Consumers, state regulators, and activist groups may become more vocal in the absence of pressure from the federal government. Once a firm is prompted to examine its production process, it embarks on an internal review in a profit-maximization framework. Several of my subjects said that they found goal setting to be useful because they were actually able to reduce costs and improve overall production efficiency once they looked at their processes through the lens of environmental sustainability. Such efforts are therefore unlikely to stop. Of course, there will be fewer firms setting goals and those goals that are set will be less aggressive than if a more normal administration took over and set aggressive emission reduction goals. And in order to achieve emissions reductions on the scale required, much more will need to be done than what is profit-maximizing for firms under the current cost regime. My point is merely that I would not expect this process of incorporating cleaner technologies into production processes to stop or reverse; at worst, it will slow down a bit. While this more nuanced look at what may happen with some aspects of environmental and energy policy shows that we are probably not destined to see pollution-spewing plants reappear all over the country, it is clear that the election of Trump is an absolute disaster for the planet. His administration will likely imperil global efforts at aggressive emission reduction by abandoning the Paris agreement, and a policy that favors the domestic development of industry at all costs will boost emissions above what they would have been under a Clinton administration. It is important not to be distracted by superficial gestures of moderation on the part of Trump, like his meeting with Gore, and instead focus on the policies being implemented by his appointees. Those of us in the academic and activist communities will need to agitate for more aggressive actions at every turn. The new school year has started, and with that, the inevitable slowdown of posts on this blog. However, with a little bit of time scraped together in the past couple of days, I wanted to talk about a broad subject that I’ve thought about for years, reflecting on my own anecdotal observations. This will be a story of my experience with Republican resistance to the idea of anthropogenic climate change and why I think it was so strong.
I finished college in 2007, and, within a couple of weeks, had a job with the Japanese equivalent of the National Science Foundation, the New Energy and Industrial Technology Development Organization, or, much more simply, NEDO. The organization had several offices around the world that were set up to monitor policy developments in several fields in the host country, and staffed with NEDO employees, locals (like me), and workers from the Japanese Ministry of Economy, Trade, and Industry (METI). My job was to follow developments in energy and climate policy in the US and Canada, sending back daily to Tokyo news updates, occasional topic reports on things like renewable energy tax policy, and records of events I attended at NGOs, think-tanks, embassies, and on Capitol Hill. I also managed contractors writing reports on things like California’s climate and energy policy. It was an amazing job, where I had the freedom to largely determine which events and issues deserved my attention. I spent my days learning all I could about renewable energy, climate change, and mitigation strategies. In meetings or at events where most attendees had some kind of agenda reflected by the industry or organization they represented, I was there as an observer, just to record what happened and occasionally ask questions. My time in the job coincided with some fascinating developments, too. When I started, the Bush Administration was fully denying climate change by doing things such as refusing to acknowledge EPA’s ability to determine whether CO2 is a pollutant, but they were having to contend with a Democratic Congress. Then, the Obama Administration took over in 2009, and the feeling was pervasive inside the Beltway that a government in total control of the Democrats would certainly pass legislation that would place a price on carbon emissions. However, it was also an era in which Republican opposition to such policies was not yet uniform. Senators John McCain and Lindsey Graham, for example, were sponsors of bills that would seek to reduce greenhouse gas emissions by pricing them. But, the denial of climate change that we see in spades today among Republicans was beginning to blossom in Congress, too. In some cases, this was understandable. Whenever I attended House Energy and Commerce Committee hearings, Rep. John Shimkus (R-IL) would bring out a poster-sized photo of coal miners in his district whose jobs he said had been killed by the Clean Air Act amendments of 1990. He would not be a party to further legislation that would hurt the coal industry in his district, he would say. But other officials, like Rep. Marsha Blackburn (R-TN), denied climate change even though they were from districts with little or no fossil fuel extraction. I remember Rep. Blackburn mocking the idea of anthropogenic climate change and proclaiming that surely any temperature changes were the result of variations in solar activity. I was taken aback at this seemingly nonsensical (though perhaps now typical) hostility to something that seemed so obvious: climate change is real and caused by humans. In order to avoid widespread damage and economic harm -- even in Republican districts! – serious emission control policies would have to be put in place. Indeed, in 2000, then-candidate George W. Bush suggested that carbon dioxide emissions from power plants be curbed. Perhaps some of this newfound resistance could be explained simply by lobbying contributions from the fossil fuel industries. But I think it also went deeper than that, as evidenced by the fact that opposition to any sort of climate policy among the GOP at the federal level has hardened greatly over the past decade. At the core of this is, I think, an understanding on the right that any method of seriously controlling greenhouse gas emissions opens the door to massive state intervention in the economy, and that is unacceptable to many people. When the sincere belief that the government inevitably makes a mess of things whenever it gets involved in the economy comes against the notion that with a problem like climate change, such involvement is necessary, the skepticism of government wins out. Additionally, I believe it was clear to conservatives by the time I came along that pricing carbon would lead to other kinds of government involvement that they so disliked. In order for climate policy to be successful, it must make fossil fuel energy more expensive so that people will use less of it. People, naturally, do not like spending more on energy, and so there were calls even during the climate bill debates, to include measures like energy assistance for the poor and subsidies for research into renewable energy and electric vehicle technology (and that famous, stalled champion of the Bush Administration, hydrogen fuel-cell powered cars). Conservatives came to see climate change as an excuse by the left to grow government and enhance redistributive programs, and this probably explained some of the enthusiasm that the left had for the issue. But I saw practically no recognition of this dynamic in the writings of flummoxed liberals at the time. Instead, there were calls for education on the issue, which were misplaced. That assumed the opposition was born of honest ignorance rather than severe cognitive dissonance. Conservatives refused to believe in human-caused climate change because it would ruin their worldview to do so. Today, that has morphed into a question of identity; many rank-and-file conservatives seem to deny climate change because it is part of their identity as those opposing the arrogant and corrupt coastal elite. This explains such terrible practices as rolling coal. It seemed then to me that one point of agreement across the parties is that strong action against climate change would lead to a society that is both more sustainable and more equitable, and I believe this is still the case. However, for one group, such a society would be an utter tragedy, as it would mean a far more active role for government in the economy than they are comfortable with. And such cognitive dissonance in the area of climate change served to pave the way for the post-truth politics we face today. I was struck by a blog post from The Economist a couple of weeks ago that discussed the necessary politicization of academic arguments in macroeconomics. The post argues that macroeconomics (and I would argue all of economics) needs to be a politicized field in order to settle academic disputes:
“[A]s scientists, they have an obligation to state their hypotheses as clearly as possible, to make testable predictions whenever possible, and to be rigorous and transparent in gathering evidence to support or falsify those predictions. But macroeconomics is also inherently political, and the practitioners who seek to ‘politicise’ their ideas and make them a political reality play as vital a role in the advancement of the field as the scrupulously apolitical academics who never write a public word outside a peer-reviewed journal.” Fundamentally, economics involves considering how society organizes itself to enhance well-being in the population. This is, at its heart, a political activity; people will have disagreements about the best ways to organize, and, in the modern era at least, they will largely use political means to settle those differences. As the beginning of the fall semester draws near, however, my mind has been focused on preparing my courses and, after the summer of Brexit, on the appropriate role and responsibility of economists as teachers, at least at the introductory level. That is, if one accepts that academic arguments will be necessarily politicized, how should one treat such ideas in the classroom while still respecting and encouraging independent thinking by students? Wrestling with these ideas is a work in progress, but I have thought through a few principles that seem to work well when discussing methodology and epistemology with students. First, I strongly reject the notion that economics should be seen as a “value-free science” as many economists would like. Portraying the discipline in this way is, I believe, both intellectually lazy and misleading. If economists are prescribing what is “best” for society, then it necessarily implies some sort of conception about how to rank alternatives, and that criteria for ranking requires value judgments. Using Pareto-optimality as a criteria, for example, is generally considered to have a status quo bias. More famously, making GDP growth a primary macroeconomic goal prioritizes the market transactions that are included in the measure while ignoring things like home production or environmental degradation that may have an impact on economic well-being, too. Most academic work, even if the author claims to be apolitical, will be at least an implicit endorsement of some value-based concept. As the post cited above notes, however, having values does not mean abandoning social scientific principles. If one advocates for a policy because they believe it will have certain impacts, one should be willing to change that recommendation if methodologically sound work does not show those impacts. The best example of this is, perhaps, the minimum wage, which most economists long argued against on the grounds that it would reduce employment because people are working for a higher wage than the market would otherwise assign them. However, many empirical studies have shown that this is not the case for “moderate” minimum wages. Most economists have therefore changed their opinions on the matter. Focusing on this approach to teaching, where values are transparent and there is an openness to change as further evidence is gathered, leads to good intellectual habits in students. They can learn to be clear about stating assumptions and constructing a rigorous and logical argument to support what they are saying. This can also help them to more critically think about their own views, which are often vague and inconsistent economic models largely taken from their parents – things like: deficits are always bad or government spending is always bad. Of course, it should go without saying that teachers should do their utmost to respect differences of opinions between themselves and students. But this does not prevent us from challenging students to make intellectually rigorous arguments, no matter their place on the political spectrum. It may be helpful to think of this as an investigation of ideology, which I do not think is a “bad” word. An ideology is a lens through which we view the world; it is the theory that fills in the gaps between pieces of empirical evidence and assigns relative importance to that evidence. Without ideology, empirical findings about the world have no connection, and we cannot have a coherent view of society and the economy. The goal of economics education at the introductory level should be, through the teaching of various concepts and skills (which can have lots of side benefits for things like professional development), to enable students to have a clearer and more consistent ideology. Learning about economic concepts may almost inevitably lead to some near-consensus on policy questions (like the notion that something should be done to reduce CO2 emissions to avoid widespread economic damage from climate change), but it is not faculty responsibility to tell students what that ideology should be. None the less, through leading by example, it is likely that, for many students, their professor’s ideology will rub off a little. This means that all the more care should be taken in how material is presented and discussed in class, not so that the professor gives equal weight to all political sides in an argument – that’s nonsensical for something like climate change or the gold standard – but so that students understand why a certain group of economists holds a given position. In so doing, my hope would be that economists can help produce a more thoughtful citizenry ready to express preferences for better policy than we have been seeing in many places. I’ve been itching to take a more theoretical turn on the blog, and I get the opportunity to do just that here. To start, we need to tread some well-worn ground that has been covered by both environmental and ecological economists. The latter group, led by pioneers like Herman Daly and Robert Costanza, were among the first economists to think of the economy as embedded within the natural ecosystem.
Simply put, the planet is a thermodynamically closed system aside from solar energy, and this, of course, is where economic activity takes place. In order to provide the things that we need and want, the economic system coordinates the extraction of natural resources and their transformation into capital and consumer goods. This coordination can be done through markets, with the state, or, as Elinor Ostrom detailed, through local communities developing systems of rules and norms – the optimum system of coordination varies. Additionally, the environment is a provider of ecosystem services, such as wetlands that help with flood control or trees that prevent erosion on a slope, and, crucially here, it is a sink for wastes. All of those resources that are extracted from the environment and transformed through the economic system are deposited back into the environment in some form. For example, coal can be extracted, burned to generate electricity, and enter the atmosphere in the form of various gases. Other materials are used and then deposited in landfills or (unfortunately) the oceans. The material flow through the economy is known as throughput, and, as ecological economists have long pointed out, it is not the same thing as economic growth. While early economists that payed attention to the environment in the 1960s and 1970s worried about humanity simply running out of resources to extract (most famously, in the Limits to Growth), we have since learned that filling up sinks is by far the more immediate problem. This is where climate change comes in. Through burning fossil fuels and other sources, humanity is overwhelming the ability of the environment to absorb greenhouse gas emissions, which is typically done by plants and the oceans. If sinks become too full, as they are already, and result in a changing climate, our ability to extract further resources becomes compromised. In the case of renewable resources, like agricultural products or fish, the changing climate can cause those resource stocks to collapse, spreading the problem from one of sinks to one of direct extraction. In the case of nonrenewable sources like valuable minerals and ores, climate change can make both extraction and transportation much more difficult. That is, climate change can undermine the foundations of the flow of resources through the economic system. Additionally, most modern economies are service-based, and climate change can impact the ability of those services to operate, imposing penalties on economic growth and development. The problem, as environmental economists have long pointed out, is that greenhouse gas emissions have historically been and still largely are, free to emit. That is, the privilege of taking up space in the giant, global sink for GHG emissions is free, and, because that privilege is valuable, people have taken advantage of it (though to be fair to our ancestors, before about the 1960s, there was little understanding that this could possibly be a problem). But the result is that, if we are to avoid catastrophic warming, we need to make big cuts, fast (Note: I loosely define catastrophic warming as that which triggers feedback loops, though I understand even warming of that level will be very damaging). If we are looking at historical emission of GHGs, the rich countries are very close to maxing out their shares if we are to make any room for developing countries to increase emissions. Even if you don’t like the idea of poor countries being able to emit more, which I find to be morally questionable, there is little that could be done to stop it. Let’s think of our rich country obligations as falling along two lines: we have an obligation to people in poor countries who simply happened to industrialize later but get stuck doing so in the context of a filling sink for carbon AND we have an obligation to future generations who will need to make some use of the GHG sink for their own development and live on a planet not irreparably damaged by climate change. I’m going to leave that statement for now in order to move things along, but a future post will look to develop the philosophy on it more clearly. Assuming that we agree we have these obligations, the question of exactly how much we need to curtail emissions comes to the fore, but it quickly becomes complicated. First, for simplicity’s sake, let’s keep our stark division between rich and poor countries -- though, realistically, I’d argue that the world should be divided now into rich, middle-income, and poor countries since the prescriptions for China would probably be different than, say, Chad. So now we are faced with several issues:
Economists are at odds over how to address these issues. Environmental economists largely argue for calculating social welfare functions for society that attempt to estimate the well-being generated from consumption and balance that against an estimate of damages from climate change. Crucially, the social welfare function for the future contains a discount rate that functions as a rate of time preference for society. That is, how much do we care about giving things up now to realize benefits in the future, sometimes past our lifetimes? Unfortunately, picking a discount rate becomes a purely philosophical question: if one doesn’t think we owe much to future generations, pick a high rate that will show we should prioritize development now. Luckily, model results driven largely by discount rate choices have started to fall out of fashion in recent years (since one can make the model show almost any conclusion simply by choosing a different rate, and a wide range of rates can be justified). Other economists argue that the discount rate approach is flawed given how little we understand about the consequences of climate change and especially where those feedback loops lie. Instead of carefully trying to balance costs and benefits – a useless exercise given the number of unknown factors – we should instead treat the problem like one of insurance. To borrow an analogy from Frank Ackerman, if you own a house, you probably have fire insurance on that house. But, unless you live near me right now, the average house will have a fire once every 250 years, meaning you will probably not use your insurance in your lifetime. But the consequences of your house burning down and not having insurance are so great that most people have the insurance for peace of mind. Similarly, because we don’t know how bad warming can get before it becomes civilization-ending, we should be willing to pay to be on the safe side of things. For instance, we are relatively confident that 2-3 degrees of warming will not be absolutely disastrous, even if it will impose costs. But the small risk of disaster starts to go up as warming continues. Even if it stays small, we should use the logic of the black swan. Fortunately, if managed correctly, the transition to a low-carbon economy could deliver lots of benefits. By shifting away from fossil fuels, other air pollutants like nitrous oxides and ground-level ozone (smog) will be greatly reduced. Green technologies tend to be relatively labor-intensive compared to fossil fuels, meaning that they offer economic opportunities to people in rural communities. The massive investments needed to meet appropriate goals would mean that economies would be closer to full employment. And, as I will argue in the future, a sustainable society is necessarily a more equitable one. Yes, there will be losers in this economic transition, like the fossil fuel industry (or, more importantly, its workers). But the potential gains from this transition are great indeed. At first glance, you may have thought that title addresses the obvious: of course climate change matters. We hear about the science and consequences quite often, unless you rely on right-wing sources for your news. Scientists overwhelmingly agree that climate change is happening, that it is caused by human activities, and that it is having and will have increasingly large impacts on society and our planet in the future. But allow me to take the opportunity to put these big ideas into a more digestible form and link the natural science more explicitly to economics in two parts. I’ll do this with the caveat that I am an economist and not a climate scientist, so my science explanations in this part will not be quite as detailed. The next post will focus more on economic theory and its links to what I describe here. First, I have watched presentations of climate research that have been utterly derailed by an audience member asking how we can be sure that anthropogenic (that is, human-caused) global warming is happening. Simply put, we have several sources of evidence that gives the scientific community its high level of confidence. Let’s start with some theories and pieces of information that we know. Scientists have long understood that different combinations of gases, such as the mix that is found in our atmosphere, absorbs and emits radiation from the sun at different rates. At the atomic level, greenhouse gases like carbon dioxide are more likely to absorb and then re-emit infrared radiation from the sun. Nitrogen and oxygen, the other big atmospheric components, do not absorb infrared radiation. To think about how this affects things on a planetary scale, imagine that the earth is a big pot of water that is being heated on a stovetop (the sun) and has achieved an equilibrium temperature. Uncovered, a lot of the heat from the pot just escapes into the room (space), but covering the pot with a lid keeps more of the heat trapped and makes the water even hotter than it would be otherwise. When more greenhouse gases are emitted, it is as though we are putting an ever-thicker lid on our metaphorical pot. All of this theory seems to make intuitive sense, but is it backed up empirically? YES! These observations come from a number of sources on the land, in the water, and from satellites collecting data from space. NASA has a great summary of such observations. The conclusion is that the world is warming consistently and the concentrations of greenhouse gases are rising. We know from industrial records and other sources what humans are emitting, so we can match that with atmospheric observations to precisely understand how the atmosphere is changing. Additionally, scientists have painstakingly researched historical climate conditions in a variety of ways to assemble a long record of climate and atmospheric conditions on the earth. For example, samples of bubbles from extracted ice cores preserve the atmosphere at that period in history, allowing them to see the composition of the atmosphere millions of years ago. If that weren’t enough, we also have another planet to observe. Venus is the hottest planet in the solar system because of a runaway greenhouse gas effect. What becomes disturbingly clear from the look at the historical record is that we are entering a climatic period warmer than any experienced by human civilization. Note from the chart below, taken from Vox, that agriculture developed only after the climate had been unusually stable for a long time – this is the conclusion reached by researchers at CalTech from whose data this comes. We also know from our observations that concentrations of carbon dioxide (the most prevalent greenhouse gas) in the atmosphere have increased from about 280 parts per million (ppm) before the industrial revolution to just over 400 ppm now. As a result, the world is about 1 degree Celsius warmer than before the industrial revolution, and, because it takes a while for greenhouse gases to get high enough in the atmosphere to cause warming, the world is certainly locked in for warming close to 2 degrees. The impacts from this you have probably heard of: more floods, more droughts, sea level rise, etc. There are two final things to keep in mind when thinking about all of this. The first is that the damage from global warming maybe exponential and not linear and, for the most part attempts to estimate damage functions are educated guesses. If the “true” damage function is actually exponential, that means that if warming doubles from 1 to 2 degrees, it increases by something like 4 fold rather than doubling. Depending on policy, the world will likely warm by anywhere from 3 to 10 degrees by the end of the century. On the upper end of that scale, the damage becomes truly civilization-threatening – and I do not intend that to be a hyperbolic statement. Even 4 degrees of warming would be incredibly disruptive. The other danger is that things could very well spiral out of control because of feedback loops in the climate system. For example, the permafrost that rings the arctic, mostly in Russia and Canada, contains huge amounts of frozen organic matter. If this thaws on a large scale, that matter will decompose and emit methane. If this happens on a large enough scale, those methane emissions could be enough to trigger more warming and more thawing and more emissions. One feedback loop could then trigger others, such as the collapse of ice sheets that would trigger a cycle as the albedo of the earth would be reduced. Because of the complexity of the global climate system and its inherently chaotic nature, it is very difficult to know just how much warming the world can take before it gets out of control. Recent evidence suggests we are closer to at least the methane feedback loop than we had previously thought. Future posts will discuss the many implications of all of this, but I will say that instead of simply sounding apocalyptic, it should be read as a call for a conservative approach to emissions control – and here I use conservative to mean that we should err on the side of caution because the risks on either side of a climate goal are asymmetric. The issue of climate change shouldn’t be thought of as win-or-lose, that we either escape it or we don’t. There will certainly be some damaging warming. Our goal should be to limit that, and especially to avoid any dangerous feedback loops that could send things spiraling terribly out of control. In the wake of Brexit and Donald Trump’s place at the top of the GOP ticket, along with the continuing threat of far-right parties across the rich world, the internet these days abounds with explanations of this phenomenon. Last week’s post here reflected on this. But I will add one more that is relatively US-focused, as I have not seen these particular ideas fleshed out yet. Motivating this are two charts that have been making rounds through various blogs in the past few months. The first, originally published in the Washington Post from Branko Milanovic’s data, shows that, relatively speaking, the working class in rich countries have seen far fewer income gains between 1988 and 2008 (keep in mind that this series ends before the Great Recession). The world’s wealthiest people and the emerging global middle class saw tremendous gains in their income during this time. Even the world’s poorest workers did well, with hundreds of millions of people leaving absolute poverty. I should note that the Post is quick to associate the entire pattern with globalization, and, while that may be true for some groups (like the global middle class), I think there’s more going on for the so-called “losers” in this chart. There has been a complex interaction of offshoring, automation, and public policies that have consistently disadvantaged workers over the past several decades. Let’s look further. Using data from the Economic Innovation Group, we can see the number of business establishments added in counties by population level during the past 3 economic recoveries, demonstrating a clear trend. The major headline here is that in the latest recovery, small counties actually lost businesses, where in the recovery of 1992-1996, they added relatively more businesses than larger counties. Digging a little deeper reveals that only 20 counties in the US added half of the new establishments from 2010 to 2014. And thus a picture begins to emerge, especially when paired with what we know about social indicators from rural America. These economies are simply not what they once were. A combination of automation, outsourcing, and lack of investment in infrastructure and education have left them with little to offer and few opportunities for their citizens. Wage growth has been poor, even in the face of rising costs of healthcare and education (and, in some areas, housing). In the 1950s, an unskilled worker earning a typical salary could generally afford a house (though keep in mind that mortgages were typically just given to white borrowers then). Years of anti-union propaganda have poisoned efforts to organize workers and left them struggling as industries that have remained in some areas, such as coal, begin to die.
One can, of course, argue that support for figures like Trump is not entirely founded on economic angst; after all, likely Trump voters have higher average incomes than likely Clinton voters. However, in recent polling, Trump leads Clinton among whites without a college degree by a margin of 30 to 58%. This is the group that has not only (and deservedly) lost some of the privilege they once had, but they have been buffeted by economic forces for which they are inadequately prepared. Call me a materialist, but perhaps they would be coping with the loss of privilege in society better if they were not anyway facing terrible economic prospects. Unfortunately for them, the economic policies that Donald Trump advocates, such as massive (I mean, massive) tax cuts for the wealthy paired with huge spending cuts, dismantling environmental regulations, and throwing up trade barriers, would do little to improve this outlook. Jobs that have moved overseas tend to be low-paying and low-quality jobs in industries such as textiles; few workers could earn a decent living doing that even if they did come back. And this assumes that the returning jobs would be as labor-intensive as before, which is unlikely. US manufacturing output is at an all-time high, meaning that firms just need fewer workers than before to make more things. Instead, changes in government policies can help, though it will take time and massive action to improve a situation that has been worsening for years. Government can promote investment in infrastructure, which is clearly needed, along with renewable energy to help meet climate policy goals. It can get more serious about employment and job retraining program, which have largely been laughably inadequate so far. These are just three examples of initiatives that could start to make a difference. Until things like this are tried or technological changes begin to once again call for greater use of unskilled labor (which is unlikely), these more rural areas of the country will continue to have a bleak outlook, and the voters living in them will continue to look for answers. I should note, too, that all of this has real implications for climate and energy policy, as we’ve seen with the closing of the UK’s Department of Energy and Climate Change when Theresa May took office recently. The department is being folded in to the Department of Business, Energy, and Industrial Strategy. Democracies that contain large numbers of workers under economic strain will be hard-pressed to pursue aggressive and long-term climate commitments, which makes the stakes of these contemporary political battles even higher. This week’s cover story in The Economist argues that traditional left vs. right political divides in advanced capitalist countries are beginning to give way to a new fault line, with those who advocate for open economic policies on one side against those who favor a more closed approach. The policies of those in the closed camp will be familiar to anyone following the news: this is the stuff of Trump in the United States, the (successful) Brexit campaign in Britain, or the National Front in France, and there are analogues with various levels of success in practically every country in Europe. They advocate a kind of nativist nationalism, hostile to any group not perceived as pure enough, and so they oppose more open immigration policies, along with free trade deals. They are not skeptical of state intervention in the economy in general, but the state should be discriminating in who it supports. Therefore, millions of voters in the recent Republican primary supported a very un-conservative in Donald Trump, who promised to maintain benefits from Medicare and Social Security while engaging the government in the deportation of more than 11 million undocumented immigrants in what would be a massive use of state power. These newly prominent philosophies all argue that the path to prosperity for natives is to minimize foreign involvement, discriminate against those not deemed appropriately native who are already in the country, and to build walls (sometimes literally) to protect "true" natives from an uncertain and frightening world.
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AuthorEconomist. Professor. Environmentalist. Archives
July 2017
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