The 'Economics of Climate Change' Koan

By Wendi Adamek (Green Tara reporter-at-large)

Okay, so we are aiming for “timeless” rather than timely—on April 11th I attended an Earth Institute sponsored panel on “The Economics of Climate Change,” which centered on the document known as the Stern Report. Then I got distracted—things like house-guests, exam-grading, and hay-fever can really break one’s focus on the end of civilization. But let’s get back to it, shall we?

The panel was co-sponsored by the Committee on Global Thought, part of a series of very worthwhile events hosted by Nobel-prizewinner and Columbia economics professor Joseph Stiglitz. The main speaker was Sir Nicholas Stern, former Senior Vice-President of the World Bank and author of The Stern Review of the Economics of Climate Change. I’m sure I’m not the first to suggest that it should be known as the Not Nearly Stern Enough Review of the Economics of Climate Change. Joseph Stiglitz and Jeffrey Sachs, director of the the Earth Institute, served as respondents.

Stern endorsed Sachs’ prescription (or was it the other way around?) that we could solve our environmental problems if all countries contributed 1% of GDP toward The Big Chill. (No, that was not the way he put it.) He argued that the sooner we devote resources to making a transition, the lower the long-term costs will be, and big savings in energy costs will help offset the costs of the transition.

Desirable policy goals include:
• Carbon pricing, setting a global price on carbon emissions.

• Government-funded research on development of alternative energy technologies

• Growth of a green economy (Hmmm, blue-green algae are achieving unprecedented annual growth rates. Does that count?)

• Increasing energy security by decreasing dependence on you-know-what

Let’s go over these in a bit more detail.CARBON PRICING favors setting a good price on bad global manners and letting the market take care of it. Stiglitz later pointed out that market regulation of a per capita price on carbon emissions would result in massive redistribution of the burden of reduction toward poorer countries. Buying the right to emit, richer countries would perpetuate their economic advantage. They would be able to maintain a high growth rate and shift the burden of retrofitting and consumption-limits to the less advantaged. Stern admitted that some regulations would be needed and economists might even be faced with the necessity of factoring in messy immeasurables like behavior, ethics, and psychology. (My very favorite Committee on Global Thought speaker this year was Prabhat Patnaik, author of The Retreat to Unfreedom, who actually called on economists to be ethicists.)

It’s been my impression that the philosophical branch of economics was dominated until recently by a frustrating quandary: actors who are supposed to be predictably governed by rational self-interest resort to irrational economic behavior with irritating frequency. This quandary generated a complex discourse on game-theory, frequently illustrated by variations on the “prisoner’s dilemma.” Analysis of choice-making strategies shows that most people will choose a lose-lose situation rather than risk gambling on a win-win cooperation strategy if they think there is a possibility they will be taken advantage of. This human aptitude for Grinchishness applies to the challenge of reaching international cooperation in carbon-pricing and emissions control. Stern called for a global policy-maker climate in which world leaders acknowledge what others are doing well, refrain from finger-pointing, and accept the responsibility to model better environm ental behavior. In other words, something like the behaviors that educators try to instill in six-year-olds. Oh well, better late than never. . . .

GOVERNMENT FUNDING will wisely deploy the magical 1% of GDP that is going to solve all our problems. Stern argues that public support is needed to create incentives to develop new green technologies. Corporations cannot be expected to develop technologies for which they cannot hold patents. Competitive pricing, otherwise so healthy and invigorating, sadly hinders widespread low-cost distribution of effective technological innovation.

Of course, corporations will be doing their share, getting to work on the stuff that can be made profitable and generating the GROWTH OF A GREEN ECONOMY. Nobody, as I recall, mentioned the word “taxpayers,” but Stern did seem to have a touching faith in the power of pressure from electorates to get legislators to move forward on emissions control. As the drama of “adaptation” unfolds, it seems that the average global privileged person will be called on to play several key roles at once—taxpayers generating that 1% of GDP, voters getting that green legislation going, and consumers keeping that green economy growing.

This is the heart of the conundrum for your Green Tara reporter, who possesses, admittedly, neither a degree in economics nor the all-penetrating Dharma-eye. Due no doubt to these inadequacies, I find myself unable to square accounts between the 1% of GDP that is going to solve our problems and all the environmentally destructive behavior that currently generates our GDP. An era of cheap energy has allowed us to live at a far remove from the realities of depleted soils, diseased forests, tainted water, and dying oceans. For several decades we have been able to construct our lives, indeed our consciousnesses, on the premise of rapid mobility and limitless consumption. It is noteworthy that while the panelists frequently alluded to development of energy-efficient technologies, reduction of consumptive behavior (hectic driving, flying, buying) was never mentioned. The nearest approach was Stern’s cautious endorsement of a gas-tax. Does a carbon emission have Buddha-Nature?

Then the bouncy and ever-boyish Sachs took the floor with a series of perky announcements: In 2008, we will have a new administration!!! (As we all know, everything is the Republicans’ fault, including the tea I had for breakfast that was flown in across nine time-zones to get to a store near me.) The business community is way out in front of the administration!!! Corporations are optimistic that this is a problem of economically manageable proportions!!!

Stern had mentioned development of safe carbon-sequestration techniques as a key area that required government-funded experimentation. Sachs now jokingly acknowledged puzzlement that carbon-sequestration technology was not yet considered safe, since someone from the Earth Institute had pioneered it. He called for government funding for testing in a wide range of environments. What he didn’t mention was that a failed experiment could mean the rapid release of large quantities of pure CO2 into the atmosphere, killing everything in the immediate and maybe not-so-immediate vicinity. Stern sternly stressed that curbing deforestation is key—forests provide the safest and most cost-effective carbon-sequestration, and emissions from deforestation are huge—Indonesia was frequently mentioned in this connection.

So, fellow eco-upayakas, instead of “it’s the economy, stupid,” our new mantra is “it’s the trees, stupid.” Got that?

Sachs embarked on an explanation of how the “mitigation/adaptation ratio” will change. It took me a while to get this, but it gradually dawned that “adaptation” was a shorthand term for what happens after enough climate-change related disasters with highly visible casualties and economic costs succeed in usefully focusing hearts and minds on the need for change. “Mitigation” refers to the portion of GDP poured into disaster relief and reconstruction. Sachs was reinforcing a point made by Stern, namely, that if we don’t move quickly, more of the magical 1% will be swallowed by mitigation and less will be available for adaptation.

Sachs seemed to accept with bodhisattva-like equanimity the prospect that as more people die, this will provide incentives to help meet necessary policy-change goals. His comments amplified Stern’s understated observation that although China and India were understandably reluctant to enter negotiations to limit emissions when the U.S. was holding out, the impact of climate change would be so disproportionately devastating for their populations that they would be forced to “come to the table.”

Joseph Stiglitz next took the podium. He immediately countered Sach’s sunny reliance on corporate consciences. He concretized the mantra-like evocation of “1% GDP”: in terms of the current global economy: 1% represents $400 billion, and he pointed out that we are currently fighting tooth-and-nail over much less. He then proceeded to cite the human costs attendant on the solutions his colleagues had proposed, gradually deflating the large colorful balloon that was to whisk us (or some of us) safely into the 22nd century.

Stiglitz called for global negotiations on the following urgent tasks:
• Developing countries must be handsomely compensated for maintaining their forests, not just scolded for not doing so.

• We must reach agreements on common standards for emissions limits, energy efficiency, and gas mileage. We must also agree on ways to bring market pressures to bear on “freeloaders” and non-compliers. Freeloaders could be punished by trade sanctions, but global standards must include provisions against using trade sanctions for protectionism or enforcing unequal trade agreements.

• Corporations must help bear the costs of infrastructure retrofitting, since they have benefitted from decades of public spending on infrastructure. Correspondingly, the government must become involved in legislation to reduce development sprawl and dependence on long distance transportation.

• We must build an independent incentive structure for research and development of truly energy efficient technologies, as market incentives do not favor research on low-cost technologies, technology sharing, or low-cost distribution.

Stiglitz candidly acknowledged that the nations currently enjoying the highest economic growth rates will have an unfair advantage in any attempt at global negotiation. He argued that China and India are already well-aware of the potential human costs of global warming in their countries, but they also recognize their power as deal-breakers at the as-yet-unmanifest carbon-brokerage table. He acknowledged that while distributional justice was obviously preferable (i.e. if the U.S. would shoulder costs corresponding to its responsibility for emissions), this should not be strictly pursued if it precludes all negotiation. (Okay, but we think every citizen who allows his or her elected representative to endorse unfair global emissions negotiations should have “I am a freeloader” tattooed onto his or her forehead. In green ink.)

Stiglitz joined Sachs and Stern in endorsing a bright outlook for new markets in green technologies, or green markets in new technologies, or whatever. Being a good Buddhist, yours truly could not help noticing that these are mostly non-existent markets in non-existent technologies. Also, nobody mentioned that these new technologies (such as solar panels, ethanol, etc.) depend on heavy use of fossil fuels to mine, manufacture, grow, transport, and replace. In more-or-less Buddhist terms, the mental formations may be wholesome, but the karma is still carbon.

And while we are sort of on the subject—contrary to some “power of positive thinking” notions floating around out there, Buddhists on the whole do not endorse the idea that what you think is what you get. In other words, if you visualize a new iPod or a new girlfriend, you may get them, but you are really just perpetuating the same old three-fold karmic pattern of greed, bickering over who gets to plug their iPod into the stereo system that is so powerful it makes neighboring cars vibrate, and ignorance.

Okay, back to our panel. When the presentations ended and questions began coming in from the floor, I began to feel as if I’d been wafted into a Pure Land (or was it a hell-world?) where the ordinary rules of karma, time, space, and language do not apply. Your Green Tara rep nearly emitted an unladylike snort when the following question was asked (in a longer and more convoluted form): “Since our economic activities are generating capital that will be enjoyed by future generations, shouldn’t the costs we assume for carbon clean-up be discounted due to the wealth we will pass on to future generations?” I waited for incredulous laughter—in vain. With utmost seriousness, Stern suggested that although “they” (future generations) would no doubt be richer due to our vigorous consumption, market expansion, and capital production, “they” might, if given the choice, choose to be poorer but have reduced adaptation costs. Wow, loads of digits in your online bank account, or an inhabitable planet—what a hard decision.

As suggestions poured in as to how “we” (the economist “We”) could factor “environmental capital” into “our” calculations, I realized (duh) that I was in the company of those who counted on or hoped to gain access to the inheritance of capital. Lots of it. The view that nothing grows forever, that all things are subject to arising and passing away, was not part of the operative paradigm of this loka. As I filed out with the excited, chattering, and very young crowd, I felt the kind of heart-stopping pity that makes it hard for me to be hard on my students. After all, I’m not going to be around for that much longer. But these bright young beings, full of energy—do they think they can inherit the economy, but not the earth?

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Wendi Adamek is co-chair of the Buddhist Studies Seminar and this blog's Green Tara Reporter-at-large. Wendi joined the Barnard Religion Department as Assistant Professor of Chinese Religions in the fall of 2001. She completed her doctorate at Stanford University in 1998, and specializes in medieval Chinese Buddhism. She is the author of several articles on medieval Chan (Zen) Buddhism, and she recently completed a book manuscript entitled The Mystique of Transmission: On an Early Chan Text and its Contexts, forthcoming from Columbia University Press.

Comments

[Auto Parts Car Parts]

First of all, i still think that this global warming hoopla is still politically motivated. There really should be nothing wrong in talking about the environment and be very concerned about it. But if this is all for the sake of bashing the Republican's all-out war against terrorism, i guess the biggest loser of all would still be mother earth.

[Comet Eye]

Hard to wrap around my head the fact that the U.S. citizens are big on Green energy and all that stuff when in fact their government allows US business to continue dumping greenhouse gases into the atmosphere. U.S. is presently the second biggest dumper of GHG next to China. Their Gov't also refuses to sign the kyoto treaty. Al Gore maybe be right.

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