Global Warming and Sustainability

In my view, the best article ever written on sustainability is by Nobel-prize winning economist Robert Solow; his 1991 speech is entitled, “Sustainability: An Economist’s Perspective” (It is hard to track down on the internet but it is included in many volumes on environmental economics; I highly recommend it to anyone interested in sustainability).

In the speech Dr. Solow lays out the key tenets of sustainability, as well as its contradictions. He defines sustainability as the societal outcomes that allow future generations to be at least as well off as people are today. He makes it clear that sustainability does not require saving specific resources, only ensuring that there is sufficient capital (a combination of human, physical, and natural) for future generations to create living standards at least as good as ours (but in ways that match their preferences, which we have little way of knowing).

Without getting into a long discussion on weak versus strong sustainability, one of the ongoing debates is the extent to which these three types of capital are substitutable. In general, environmentalists tend to think that many forms of unique natural capital (e.g. a national park) are not substitutable with, for example, an increased number of hospitals (i.e. physical capital), and probably most economists would agree, although the discussion gets trickier when we turn to less unique environmental resources.

The key insight that Solow raises is that sustainability is at its core about leaving sufficient capital for future generations, and therefore, our decisions today about how much we consume versus how much we invest are the key drivers of sustainability.

But Solow had another profound insight. He pointed out that it is morally problematic to worry about the welfare of people who are yet to be born while so many people currently suffer in dire poverty. Putting aside money to ensure that future generations are well off creates a moral dilemma if this money could be used to help people today. But this raises a further paradox; much of what people need today is increased consumption (stoves, refrigerators, more food, etc.) when sustainability generally favors investment in capital. To be fair, I think Solow’s exaggerated this tension because the world’s poor need plenty of investment in capital in the form of infrastructure, medicines, schools, etc. Nonetheless, Solow’s insight remains; there is an uneasy tension between wanting to help future generations while billions suffer from a lack of resources today. In essence, many forms of poverty are quite “sustainable”, which should give pause to everyone enamored with this concept. In fact, many environmentalists have raised alarms as the Chinese and Indians have vastly increased their material standard of living because of the environmental impacts, which speaks exactly to this point.

Enter global warming; how does sustainability inform the discussion?

1. If the worst-case scenarios of global warming are likely then we can say with some confidence that current behaviors (to the extent that they are contributing to global warming- this is key) are putting us on an unsustainable path, because they are going to make people in the future worse off than we are today (and we should enact major changes in our behavior). The reason I put the caveat in above is that even in the worst-case scenario, if changing our behavior would do little to actually prevent global warming, and at the same time make us much poorer, then doing little to stop it would still be a better strategy.

2. If the consensus among scientists points to an extremely low probability of the worst-case scenarios, then we are forced back into a situation where we have to balance the costs and benefits of changes in our behavior against the backdrop of how much our behavior is likely to affect the medium to long-term climate trends.

3. Regardless of which scenario we are in, global warming presents us with large distributional and equity issues because the richer nations by and large have the capacity to deal with global warming while the poorer nations do not. Again, the question as to whether helping poorer nations deal with global warming may be cheaper than averting it needs to be examined carefully.

In summary, even through a sustainability lens it is ambiguous whether we must act now to do whatever we can to avert global warming. Given the massive cuts in carbon emissions (in the realm of 70%) that many think would be required to prevent any further warming, one doesn’t have to be a pessimist to believe that given current trends the probably of this happening is extremely low, and therefore, as I have mentioned previously, mitigation strategies may be preferable.

In the end, global warming presents us with very tough choices based on a huge range of scenarios that are highly uncertain. People in the future may look back at us one day and condemn us for our inaction, or they may be grateful that we didn’t spend so much on the problem, depending on how it plays out.

J.S.

Comments

[TB]

Good post; I found it highly edifying

You touched on the idea that increased infrastructure spending could be used help mitigate both poverty and environmental concerns, wouldn't that seem to be the ideal solution? For instance a better public transportation could not only be an economic stimulus but help cut down on GHG. It's a bit simplistic but couldn't one suggest a cut down on conspicuous consumption and instead invest that money in say education which would have (hopefully) both a positive economic and environmentally friendly out come?

[Charles Young]

This post airs (though it doesn’t quite advocate) two possible reasons for giving a low priority to cutting greenhouse gas emissions. The first is that “if changing our behavior would do little to actually prevent global warming, and at the same time make us much poorer, then doing little to stop it would still be a better strategy”. A related idea is “Given the massive cuts in carbon emissions (in the realm of 70%) that many think would be required to prevent any further warming, one doesn’t have to be a pessimist to believe that given current trends the probably of this happening is extremely low, and therefore, as I have mentioned previously, mitigation strategies may be preferable.”

The second is that “it is morally problematic to worry about the welfare of people who are yet to be born while so many people currently suffer in dire poverty. Putting aside money to ensure that future generations are well off creates a moral dilemma if this money could be used to help people today.”

Both are invalid.

As far as the first is concerned, it is not an all-or-nothing scenario. The more we can reduce GHG emissions, the smaller the probable eventual warming. A 70% cut only seems improbable because most people have a low appreciation of the problem. If we were really convinced – as many scientists are, though 70% is probably on the high side – that this was necessary to prevent runaway feedback effects, a reduction on this scale could certainly be accomplished, almost certainly with much smaller economic consequences than people currently believe.

The second is a specious argument already popularised by Lomborg. It reminds me of a cigarette addict saying: “should I give up smoking? If I gave the money to Oxfam, it would have a greater effect on human welfare. So I’ll light another cigarette.” Proponents of this argument have no intention of making sacrifices to alleviate present poverty, but are merely seeking a rationalisation for inaction. If you sell your SUV, you could use the money to alleviate other people’s poverty, or you could use the money to have a party. Either way, you should still get rid of the gas-guzzler.

The real trade-off is not between reducing poverty now and reducing GHG emissions. Few of the things that reduce severe poverty have much of a GHG cost. It is between the present satisfactions that we get from GHG-intensive activities, and the future costs these may impose. Before considering this trade-off, it is worth reflecting on the following question (as I’ve stated elsewhere on this site):

Would it be better for Alexander the Great (or any one of his contemporaries) to have once had an extra glass of wine, even if the result was the elimination of the entire world capital stock in 2006?

If you answer “Yes”, you are in the company of many economists (for example Nordhaus and Boyer in their book on the costs of global warming). Discounting human welfare at 2% per year justifies this conclusion.

If you answer “No”, you are, of course, sane. And you will understand that present sacrifices are justified, and indeed needed, if the alternative is to put at risk future welfare. This is the valid part of Solow’s message.

[J.S.]

Charles- you raise some good points but I think you are fundamentally wrong. Please explain the following:

a. How can dramatically reducing CO2 happen without China and India and other developing countries happen?

b. Since you can't (I answered the question for you) tell me how those countries, which represent almost half the world population and most of the poor, can reduce CO2 by large degrees without heavy costs?

J.S.

[Charles Young]

Those countries still represent a relatively small proportion of carbon emissions - we need to start with the major GHG emitters in North America and Europe.

I said that reducing dire poverty had few GHG costs. I think you are muddling up the issue of preventing growth in GHG emissions by the growing middle classes of India and China, and reducing the poverty of their neediest groups. TO reiterate, the latter carries minor implications for carbon emissions.

[J.S.]

So you are confident that if we want to significantly raise the material standards of living of the world's poor- that means more refrigerators, electricity, cars, food, medicine, roads, schools- that we can do this at relatively low cost and still have an overall global CO2 reduction in the area of 70% within the next 50 years? If so, please provide references that support this- I would love to be proven wrong on this.

Thanks,
J.S.

[Charles Young]

Are we talking about reducing dire poverty, or about owning cars? Obviously, with present technology, car ownership can't be increased without increasing carbon emissions. But raising life expectancy and improving nutrition and education have very limited carbon implications.

Still, the discussion about reducing carbon emissions in developing countries is a bit academic at present. The obvious place to start is where the per capita emissions are the highest. Reducing US and European carbon emissions by 60% would clearly be a huge upheaval in life styles, but why would it reduce life expectancy, or educational and cultural standards? Provide references....

[J.S.]

Charles,

So, let me make sure I understand you- you're talking about providing basic subsistence+ to the poor, but nothing approaching a middle class life that they all want, which we have flaunted in their faces for decades, and for which they have as much right to enjoy as anyone- is that correct? If so, this gets at exactly the tension I am talking about (and Solow)- environmentalists seem to want to somehow gloss over the fact that there are billions of people waiting to get the luxuries that we in the West take for granted and just when they're about to be able to do so, guess what, because of global warming, we say no- I really don't think this is a) morally tenable, b) practical, or c) has even a slight chance of happening- the only viable environmental strategy has to begin with the basic premise that there are going to be billions more middle class consumers over the next couple of decades (hundreds of millions at minimum)- we can talk changes in technology, incentives, etc. but to pretend that reality is otherwise to me seems crazy and elitist.

J.S.

[Charles Young]

J.S., I hope you can see, and accept, where the logic of your argument is leading you. If you are correct that a decent lifestyle for those who are currently poor requires much larger carbon emissions, then that makes it all the more urgent that the high-emitting countries take major steps - without delay - to achieve cuts in their emissions. Agreed?

Elitism would consist in thinking that the only group that is entitled to emit unsustainable volumes of carbon is ourselves.

No group of people is more, or less, entitled to jeopardise future generations than any other. If, as the emerging scientific consensus suggests, major cuts in emissions are required, then the adjustment is likely to be more painful for those that have become used to a high-emitting lifestyle than for those that have not.

I am not saying that anyone's horizons should be limited to basic subsistence. If you think about it, you should be able to come up with a wide range of activities that have no net carbon impact, but are way beyond basic poverty. Let me know if you'd like some suggestions.

[J.S.]

Does your list of suggestions include air conditioning, personal car use, refrigerators full of fresh food, vacations, electronic devices, etc.? If not, do you want to go on the record saying that not only should rich people give these up but poor people should not even get the chance to experience them? I'm not trying to be overly provocative, but trying to undermine the tension that most enviornmentalists seem incapable of facing.

J.S.

[Chris Ball]

I always know a J.S. post because it's long, prima facie moralistic, and lacking in good economics content.

Sorry, but it had to be said.

[joshua corning]

Number of people dead due to global warming to date - zero

Number of people dead due to poverty each year - How many ways to add up a million and more?

choice made, lets move on.

[Charles Young]

"He (Solow) pointed out that there it is morally problematic to worry about the welfare of people who are yet to be born while so many people currently suffer in dire poverty." It was J.S., not me, who limited the discussion to dire poverty. I hope he can see that the moral obligation to worry about other people's lack of cars is a little less than to worry about their lack of food.

Joshua Corning has fallen for the Lomborg ploy and believes there is a choice between action on poverty and action on global warming. Action on the one in no way prevents or precludes action on the other.

[J.S.]

Chris- thanks for the laughs, I appreciate it. We need more constructive comments like yours or we'd be lost.

Charles-I absolutely agree that tackling poverty is key and many of the things I mentioned are just that- you still have not replied to my basic question- is getting people out of poverty the end game for you or do you recognize that the rest of the world has every right to a middle class life and its luxuries as the rest of us? And that this poses challenges to massive CO2 reductions?

Joshua-are you fully embracing economic development for the world's poor regardless of its affects on global warming? Not sure exactly what you are advocating. Please clarify.

Thanks,
J.S.

[Charles Young]

Before I answer J.S.’ question, I am puzzled that, having raised the issue of sustainability, he wishes to focus the discussion on those parts of the world population whose lifestyle poses the least threat in this regard (though it certainly has other shortcomings). Anyone with the concept of diminishing returns in his veins would surely start at the other end, and reflect on economically justifiable changes in those countries with the largest per capita emissions.

(While I am puzzled by this question, I do have a theory about the answer. I think J.S.’ motivation in writing his post may have been to provide some soothing mood music which would make the reader and the writer conclude that complete inaction is a justifiable response to the threat of global warming; also to insinuate that this inaction is somehow motivated by benevolence towards the world’s poor. Provision of this kind of reassurance is a market niche already occupied, no more plausibly, but I suspect more profitably, by Bjorn Lomborg. Now that the scientific denial of global warming has become intellectually untenable, the public is keen to listen to economists telling them that they needn’t do anything about it).

Now to the question: I am not sure quite what J.S. considers to be a middle-class lifestyle, but I have no wish to deny it, or luxuries, to anyone. J.S. seems to have ideas about the immutability of technology which few economists would share. I believe that a 60% cut in CO2 emissions is a feasible challenge if the twin horses of the market and technology are harnessed. The way to get them to pull together is to impose a Pigovian tax on carbon, and to use the proceeds to scrap many of the distorting non-Pigovian taxes that currently fund public expenditure. (It sounds as though J.S. would like to set aside some of the proceeds for development assistance, and far be it from me to quarrel with that, though I personally have reservations about the returns on much of such expenditure).

As is apparent from the papers submitted to Lomborg’s 2002 “Copenhagen Consensus” meetings (you can get them at http://www.copenhagenconsensus.com/Default.aspx?id=165) the optimal size of that tax depends critically on the discount rate used. If you think it would have been better for Alexander to have had that glass of wine (see my first post in this series), you will conclude that the tax should be quite low. Of course, my Alexander example was just a thought-experiment. Now, however, there are strong reasons for believing that our actions in regard to carbon emissions may have very major future consequences.

With the impetus and incentives given by a sizeable carbon tax, technical change will take more of the strain than J.S. seems to imagine. But behaviour will also adapt to the resulting changes in relative prices. It’s a mug’s game to try to guess how much of the adaptation could come from technology, how much from changing patterns of consumer spending. However, J.S. provided a list: “air conditioning, personal car use, refrigerators full of fresh food, vacations, electronic devices”. Here are my guesses: Air conditioning and refrigerators have the advantage that they are needed most when solar power is most readily available, though I suspect more fresh food will come directly from nearby gardens and markets and less via the refrigerator. Vacations – more by surface transport than by jet, pending technical changes in aviation. Electronic devices – relatively low in energy demands, easily met by renewable energy sources even with today’s technology. Personal car use – scope for massive cuts in emissions in response to price changes, but getting to a 60% cut in carbon emissions will require behavioural changes pending technical progress.

The important thing is to make a start, to reduce first the emissions that produce the lowest social benefits. The market will take care of this, provided costs reflect externalities, including those affecting future generations. There is no reason why those in developing countries should not look forward to expenditure patterns that seem implausibly luxurious to them now - but they ought not to be replicas of the expenditure patterns of today's high-emitting consumers, which need to alter urgently.

[tobias]

there is another point i'd like to make. if you say that everyone should be allowed to have the same living standards like the western world has right now, i guess this won't be possible. If every chinese would use the same amount of oil that a us-american uses, china would need 80mio barrel oil a day. (more than is produced a day worldwide). So it is just not possible. to live this high-standard life, we need to focus on renewable energies, which can provide the energy needed. So maybe fighting climate change is the the instrument to reach both goals. reduce poverty and save the earth.
it is clear that this is not a fair solution, the western world was allowed to use the resources while developing countries have to focus on other (maybe more expensive )ways to raise their living standard.

PS: please excuse any spelling or grammatical mistakes

[J.S.]

Charles- thanks for the more elaborate response. A couple quick points and then you can have the final word if you'd like.

1. The point of my piece had nothing to do with saying that we shouldn't do anything about global warming- I have written many times that we should do something along with many concrete suggestions (just put J.S. in the search).

2. What I am discussing are the costs and benefits (albiet in a direc way) and more importantly the opportunity costs that will largely affect the poor

3. I think a carbon tax may very well be the correct way to go and as a technological optimist I have no doubt that a SUFFICIENTLY HIGH tax would do a lot to spur efficiency and innovation and may eventually lead to the reductions in CO2 that we need in a shorter time frame and at a significantly lower cost than many current estimates- I have no quarrels with that but...(and here's the rub)

4. A significantly high carbon tax would definitely hurt poor people's immediate standard of living the most and their immediate prospectcs for improving their material standards of living. It would greatly increase the costs in the short (and probably medium run) of many of the things that they so desperately want (and I believe have the right to), which are energy intensive. I am NOT saying that they may still not benefit in the future from such a course, I am NOT saying that we shouldn't advocate this, but only that this is a trade-off that most environmentalists seem to want to ignore and brush off, which I think is bad economics AND wrong from a moral standpoint. Economics is about trade-offs at its core and with global warming most environmentalists want to focus only on the trade-offs of inaction, and not the trade-offs of action. That's my main point, which I think is one of Solow's great insights in the essay that I cite at the beginning.

J.S.

[Charles Young]

Delighted to hear that my theory in parentheses was wrong, and apologies for maligning J.S. with it.

I can’t understand why J.S. thinks that a carbon tax would impact those in extreme poverty. Most of them are outside the market economy, so would be little affected. To the extent that they are in the market economy, many of them are selling products (natural rubber, sugar, other potential sources of ethanol, vegetable oils) whose prices would rise in response to a carbon tax. If some of them are both in the market economy and vulnerable to a carbon tax – India’s urban poor consume kerosene for example – it would be eminently feasible to offset the impact. But, to repeat, it is in the high-carbon-emitting countries that action is needed most urgently. As for the poor in those countries (who are for the most part unimaginably wealthy by the standards of those in extreme poverty), they are subject to a whole range of other taxes, and offsetting would present even less of a problem.

Economics is indeed about trade-offs between more of one thing or more of another. What we have been discussing is the relationship between more of one thing (goods to relieve dire poverty) and less of another (hydrocarbons burnt, predominantly by those in wealthy countries).

[joshua corning]

Joshua-are you fully embracing economic development for the world's poor regardless of its affects on global warming? Not sure exactly what you are advocating. Please clarify.

AGW is a fraud so I do not advocate dumping billions into a pit...if you need the excuse that taking billions out of the world economy will hurt the worlds poor then have at it.

[Liz]

This discussion highlights the importance of building in mechanisms to achieve both carbon reductions and sustainable development simultaneously. One method some countries are using to reach Kyoto compliance is Clean Development Mechanisms (CDMs), in which polluters can obtain carbon credits by financing renewable and energy efficiency programs in developing nations. The system is not perfect and is in its infancy, but it does illustrate that it's possible to work toward carbon reductions while simultaneously working toward access to electricity in impoverished areas. Future climate change policy can and should move in this direction.

[joshua corning]

One method some countries are using to reach Kyoto compliance is Clean Development Mechanisms (CDMs), in which polluters can obtain carbon credits by financing renewable and energy efficiency programs in developing nations.

So Kinto, in his hut in africa, has a choice; he can cook his food using charcoal that will increase air pollution in his hut that his family will breath or he can go to the nearest carbon exchange which is 60 km away and 4 days walk so he can use a karosene stove....friggin brilliant.

[Charles Young]

I don't think Joshua has quite understood. It's the electricity company, not the consumer, that uses the carbon exchange.

But since Joshua believes that global warming is a fraud, he might want to go to some site such as http://www.realclimate.org/ to debate with the scientists. (Perhaps he would find their claims that the world is more than a few thousand years old equally controversial).

[Green Underbelly]

After completing this post, I began hearing Al Gore 's tune in my head. Basically it struck a chord with my morality. He said it was a moral imperative that we make every effort to divert the strain we're putting on the Earth and what's more, it's immoral to (even with the arduous predictions the IPCC is making) act with indifference.

I don't know exactly how an economist's perspective on morality fits into the global warming arena, and I don't know how the majority of people feel about Al Gore, but he poses a logical basis for action.

What can be said about humanity if we make no attempt to limit, at the personal level and at the national level, greenhouse gas emissions?

I see investing in green infrastructure as an opportunity-- it SHOULD be an apolitical theory.