Posts Tagged ‘environmental economics’

I’ve written a lot here about climate change and environmental economics, trying to point out weaknesses and blind spots in the cap and trade approach. Before I digress, then, let me say that I think getting ACES passed through the Senate would be a step in the right direction. Just like health care reform, I’m aware of the political limitations, disappointed in the state of the discourse, but realizing that right now, something better isn’t possible (unless, of course, the EPA shows it’s willing to get the job done without Congress- then, that would be preferable).

Today, though, 5 environmental groups said that the Senate bill simply isn’t good enough- it’s a step in the wrong direction. Let’s not over-interpret this. Tuesday, 31 environmental groups came out in favor, as the article notes. Nevertheless, I think opposition to the bill from the “left” demonstrates tensions between environmental groups and economists, and I find myself quite sympathetic to the environmentalists. Environmental Economics argues that these tensions should be set aside, that environmental economists are on their side:

Writers like David Roberts and Bill McKibben, who routinely characterize mainstream economics as somehow antithetical to environmental concerns, are inadvertently spreading the exact narrative that the Right wants everybody to buy into…The overwhelming majority of mainstream economists favor stronger environmental regulation on many fronts, especially climate change…The public needs to know that most of the leading minds in economics come down squarely in favor of strong climate change legislation, as well as efforts to improve water quality, clean air, and biodiversity protection.

I don’t disagree with much of what he says, but I think that the author ignores the root causes. Before I get into that, I’d like to highlight Frank Ackerman’s post at RWER about underestimating the social cost of carbon:

So far, the administration’s interagency working group that has been studying the SCC has come up with a range of values, with a “central” estimate of $21 per ton of CO2 in 2010, or roughly 20 cents per gallon of gasoline. Over time, the SCC would rise, but only to $45 per ton (in 2007 dollars) by 2050…

But this doesn’t need to be the last word. In fact, it absolutely shouldn’t be, because the analysis that led to that number is based on deeply flawed economics, omissions, and poor value judgments…

For starters, it relies on an overly narrow review of climate economics, relying on a handpicked set of models — FUND, PAGE, and DICE — that happen to produce very low SCC estimates. All three models have serious problems…

We also found that the working group was aggressive in “discounting” the value of future costs, considering rates of 2.5 to 5 percent per year that trivialize future damages…

A last and very serious concern is that the SCC calculations don’t take into account the small but hugely important risk of catastrophic climate damage…

There are too many open questions in the SCC calculation to recommend a precise alternate value based on the information now available; there is a need for more extensive research, examining the full range of available studies of climate damages and costs, and analyzing assumptions about the risks and magnitudes of potential climate catastrophes. In the United Kingdom, where carbon pricing and cost calculations have a longer, better-researched history, the latest estimate is a range of $41 to $124 per ton of CO2, with a central case of $83.

I don’t think Ackerman’s concerns can be easily explained away, and I’m willing to duke it out in the comments over each assertion. The upshot of his assertion is that there is a lot of play in these models for a number of parameters. Sure, we could take the three issues (climate model, discounting, and fat tails) and produce a 3-D table of SCCs under every permutation. We could even take the middle estimate in each parameter, get our number, and go home- it would probably end up a lot higher than $21/ton. However, that still wouldn’t get to the heart of it.

The problem is that economists, as the go-to people on this issue lately, are being asked to make “value judgments,” as Ackerman rightly puts it, on these 3 issues. And they are value judgments- I’ll argue that one too. Economists should not be deciding what the future is worth, what the value of a catastrophe is, or the relative value of a life across countries. So, even if most environmental economists got in the game because they love the environment, they’ve been corrupted by the play in these parameters, and the ease with which their assumptions can generate a nice number (I’m not trivializing their models, which were undoubtedly the fruits of hard labor of thought). They can assume whatever to generate the number that “looks” right, i.e. gets something done and is politically feasible.

But that’s not the role of economists. The role of economists is to allow the debate to center where the center actually is. By making choices they shouldn’t be allowed to make, they force environmentalists to compromise twice: once to get the number that “looks right,” and then once again when the politicians bear their claws and create a neverending set of loopholes. I suppose having written all of this, and working up quite an angry sweat, I’m something of an environmentalist. I don’t have any beef with environmental economists for the work they do- rather, it’s their place in the system, and how their work gets used, that I tend to oppose. It’s the system, man. It’s unfortunate, but that’s why environmentalists don’t trust economists.

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I saw a film last night called Lords of Nature: Life in a Land of Great Predators, which demonstrated that the elimination of great predators can have vast effects on their ecosystems. Predators in general have been run out of the lower 48 states; in particular, the absence of the wolf in places like Yellowstone National Park, Minnesota, and Wisconsin has had surprising effects on the forests they used to stalk. The basic argument in the case of wolves is this: wolves prey on deer and elk, whose foraging stunts the growth of new forest flora, leading to tree decline and thus struggles for lower species and the landscape itself.

The filmmakers pointed to a number of examples, including Yellowstone and Zion National Park in Utah where tourist fears of wolves led to their expulsion from these areas and thus to the decline of the overall ecosystem. Wolf reintroduction has been successful in restoring the ecosystems. Thus, the next frontier for wolf reintroduction are areas where human conflict is more direct- with cattle ranchers in the West and sheep herders in the North. However, concerted efforts among government agencies, NGOs, and even Deer Hunter Associations have allowed successful cohabitation of domesticated livestock and wild predators. Targetted herding can ensure that wolves primarily prey on the overpopulated deer and elk, and not on valuable livestock.

Of course, the buildup to the predators’ decline was decidedly human. Shortsighted interventions aimed to protect “assets” and maximize profits led to the one-sided demonization of particular species. Forgive me if I’m reaching as I argue this case is an example of capitalism’s unilateral drive for profit and ignorance of their long-term folly.

A not dissimilar thing is happening with bee colonies- the New York Times has an article about the collapse of wild bee populations and the failure of domesticated beehive increases to compensate. The problem isn’t necessary bee collapse itself- it’s that humans are asking too much of them.

This wouldn’t mean the end of human existence, but if we want to continue eating foods like apples and avocados, we need to understand that bees and other pollinators can’t keep up with the current growth in production of these foods.

The reason is that fruit and seed crops that are most dependent on pollinators yield relatively little food per acre, and therefore take up an inordinate, and increasing, amount of land. The fraction of agriculture dependent on pollination has increased by 300 percent in half a century.

What happens when lands are converted for crops? Wild bee populations decline:

The paradox is that our demand for these foods endangers the wild bees that help make their cultivation possible. The expansion of farmland destroys wild bees’ nesting sites and also wipes out the wildflowers that the bees depend on when food crops aren’t in blossom. Researchers in Britain and the Netherlands have found that the diversity of wild bee species in most regions in those countries has declined since 1980.

Human replacement of wild bee populations can only go so far, and it cannot replace the biodiversity necessary to sustain an ecosystem. Of course, this aspect was present in Lords of Nature as well. The presence of great predators does not just favor certain types of flora in a zero sum-game; it also forces the rapid evolution and adaptation of fauna, creating a bevy of biodiversity. Try as we may, we’ll never be able to put a value on this biodiversity. As these episodes point out, ecosystems are complex, and it’s very arrogant for humans to assume that simple valuation will preclude unintended consequences.

Reducing human impact on nature is a good in and of itself. It may mean sacrifices as well:

If we want to continue to enjoy almonds, apples and avocados, we have to cultivate fewer of them, more sustainably, and protect the wild bees that help make their production possible.

Similarly with the predators, we may have to be willing to pay more for livestock goods and consume less, as further predator reintroduction will result in losses. However, the benefits that come from these sacrifices appears to compound over time, so it’s necessary that we not underestimate the value of nature.

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The cap-and-trade scheme under consideration in Waxman-Markey relies heavily on carbon emission offsets, whereby developed countries buy the right to emit more by offsetting emissions elsewhere. Offsets carry a number of issues, which I’ve begun to discuss in the context of cap-and-trade here and here. Three aspects I’d like to talk a little more about are the effects of offsets in the “elsewhere” countries, the uncertainty abou their valuation, and implementation issues

I was first drawn to a recent article published by Ben Block of Worthwatch Institute about the prospects of REDD, which is the mechanism aimed to reduce emissions from deforestation and will play . The Copenhagen Accord offered support for this mechanism, and on the surface, it seems like a good way for less developed countries to be rewarded for their preservation of otherwise endangered lands.

While support for the policy has grown, considerable progress is still necessary before multinational organizations, national governments, and local authorities are ready to administer REDD programs, analysts said. Without proper reforms, the program threatens to increase human rights violations, land conflicts, and forest-sector corruption, and REDD’s ability to reduce emissions would be in doubt.

“If significant payments were to flow today, REDD programs would be challenged to meet the tests of effectiveness in reducing emissions, efficiency in channeling funds, and equity in distribution,” said Frances Seymour, director general of the Indonesia-based Centre for International Forestry Research.

Land is certainly the key issue, as land rights are generally poorly defined in less developed countries, and land reform is often a contentious part of domestic politics. Under REDD, payments flow to the owners of the land. However,

Governments continue to claim ownership of most forestland – some 75 percent worldwide, according to a report released last month by the Rights and Resources Initiative. In many cases, however, farming communities and indigenous groups have resided on much of the land for generations…

In areas where land rights remain unclear, governments or private industry may displace forest communities from their homes to gain access to forest carbon, human rights campaigners warn. Where indigenous groups or communities clearly own the forests, environmental and human rights groups are reporting instances of REDD project developers offering contracts without fully explaining the deals’ consequences.

Land ownership conflicts are not merely hypothetical. Indigenous peoples’ rights have become a large enough issue that the African Commission on Human and Peoples’ Rights recently handed down a landmark ruling on a Kenyan eviction case from 1973. The linked column notes,

By taking into account rights flowing from an indigenous community’s deep cultural and historical connection to the land, the commission’s ruling sets an important precedent for respecting the claims of traditional herders and forest peoples…

However, while Kenya has never been better positioned to rise to the challenge, political will to convert legislation into real change on the ground cannot be taken for granted.  Successful implementation of the ruling on the Endorois will require vital monitoring support from the commission itself.

The stakes on land issues are undoubtedly going to increase with REDD, and it’s unclear if African governance is adequately prepared to handle it. By embracing offsets, and REDD with them, the developed world could be unwittingly open up a destabilizing can of worms.

The other issue I want to raise is environmental valuation. I think this valuation can be a good thing. For instance, an eye-popping report was just released that said the world’s largest corporations caused $2.2 trillion of environmental damage in 2008, half of which was from CO2 emissions, in total equivalent to 1/3 of these company’s profits. Making the public aware of these huge damages is critical. However, the tricky thing with environmental valuation is that even if high totals like this one are reached, they may still be underestimates.

Ed Fullbrook at RWER points to two Guardian articles, one that favors valuing the environment, and one that raises valid concerns. In the first article, Pavan Sukhdev says that,

We cannot manage what we do not measure and we are not measuring either the value of nature’s benefits or the costs of their loss. We seem to be navigating the new and unfamiliar waters of ecological scarcities and climate risks with faulty instruments…

Holistic economics – or economics that recognise the value of nature’s services and the costs of their loss – is needed to set the stage for a new “green economy”.

Contra Sukhdev, Andrew Simms writes,

 there is a point when it becomes meaningless to treat the ecosystems upon which we depend as mere commodities with a price for trading. For example, what price would you put on the additional tonne of carbon which, when burned, triggers irreversible, catastrophic climate change? Who would have the right to even consider selling off the climate upon which civilisation depends? The avoidance of such damage is literally priceless.

Fullbrook notes that,

Simms sees this new enthusiasm as an economist’s fool’s-gold, but one that potentially is infinitely more damaging…

This dilemma between wanting to make polluters pay and avoiding the ultimate category mistake urgently needs to be discussed. We must also learn not to tie ourselves in nonsensical knots when using side-by-side the terms “value”, “price” and “measurement”.

The concern of underestimation, perhaps even exaggerated by Simms, is a valid one. However, economists feel the need to place a value on everything. Offsets essentially are founded on the ability to value certain environmental activities and abstentions. If they miss the mark (and my guess is they will skew to underestimation), the environment and our economy’s future capability will suffer.

Finally, even if offsets can be correctly valued and land issues reconciled, will they actually, err, offset any emissions? Stacy Feldman at SolveClimate has an investigative piece on some of the issues with offset schemes.

“It’s essentially the wild, wild west,” said Andrea Johnson, the forest campaigns director for the non-governmental Environmental Investigation Agency. “Everybody is kind of auditing themselves to a large extent. There is no one system.”

Because these projects can be in far off lands that are tough to track, it can be hard to know what’s real and what’s hype, other than trusting what the company says, said Jutta Kill, head of the climate and forests campaign for UK-based FERN.

Further, projects are being outsourced to the private sector, and companies involved may not be able to follow through. Eco2, which is running a tree-planting in Sumatra, is one example:

In an updated financial disclosure document filed in December, the company said its operations are dependent upon its ability to raise “significant amounts of capital,” but “there is no assurance that such capital can be raised…” […]

In its quarterly report to the SEC in September, Eco2 was more direct: “The company’s cash and available credit are not sufficient to support its operations for the next year.” […]

The Eco2 advantage, says the firm, is its fast-growing strain of Kiri tree.

“Seven years is incredibly quick,” said FERN’s Jutta Kill, who said she had never heard of the Kiri tree.

If Eco2 claims to generate carbon credits that quickly, it means one thing: They’re growing tree plantations of non-native trees “rather than a forest,” said Kill…

Fred Stolle, a program manager for WRI’s Forest Landscape Objective, said a fast-growing species is not a strong selling point for carbon reduction.

“Every pulp and paper company in the world has fast-growing timber species,” Stolle said. Even if “it might be some super-duper tree that has more carbon in it, if you cut it down and use it for paper and pulping, then you still get some emissions of carbon.”

“And if you use it for firewood, of course you burn the whole thing. I don’t see any reason why that form of business should get carbon credits,” he said….

The other major key to Eco2’s model is selling carbon credits before the trees exist, a common practice…But according to Kill, forward selling is risky for investors and local communities.

These problems exist with offsets as a relatively small sector. However,

If the U.S. adopts a cap-and-trade system, it “would then retroactively let a lot of those voluntary offsets into the new system, and the price would just skyrocket — triple or quadruple overnight,” he said. “That’s why there are so many carbon cowboys trying to get in early. They are not really concerned with the quality of their product; they are more concerned that they get in.”

Global carbon trading has become the classic speculative market, said Kill, where people trade only for the purpose of profiting…

The system is helped by the fact that there is little time and money for quality control.

I apologize for the length of this post, but I think the issues associated with offsets are critical for understanding the shape of climate legislation. This fight may be in vain, as REDD seems even more firmly seated in conventional wisdom than cap-and-trade itself. Nevertheless, policy makers need to think long and hard about the human and environmental consequences of adopting this flawed mechanism.

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A couple of weeks ago, James Hansen had an op-ed in the New York Times against a cap-and-trade system. After reading it, my hope was that it would get people’s attention and begin to shift the public discourse against cap-and-trade. I was disappointed when I saw that Paul Krugman denounced him as “unhelpful Hansen” that same morning, arguing, that between a cap-and-trade versus fee-and-dividend system,

The only difference is the nature of uncertainty over the aggregate outcome. If you use a tax, you know what the price of emissions will be, but you don’t know the quantity of emissions; if you use a cap, you know the quantity but not the price.


It’s just destructive to denounce the program we can actually get — a program that won’t be perfect, won’t be enough, but can be made increasingly effective over time — in favor of something that can’t possibly happen in time to avoid disaster.

He also pulls the economist trump card:

Things like this often happen when economists deal with physical scientists; the hard-science guys tend to assume that we’re witch doctors with nothing to tell them, so they can’t be bothered to listen at all to what the economists have to say, and the result is that they end up reinventing old errors in the belief that they’re deep insights.

Well, Hansen was obviously miffed about this post as well, because like me, he generally agrees with Krugman’s insights. Today, Hansen responds on the SolveClimate blog. He starts out with a key fact:

As long as fossil fuels are the cheapest form of energy their use will continue and even increase.

Then he takes on Krugman’s arguments one-by-one:

Krugman Argument #1: Cap‐and‐trade is the only way to get an effective agreement rapidly.

That is a myth. In fact, every cap‐and‐trade regime has taken many years to hammer out. Kyoto negotiations dragged on a decade and were not completed. Individual countries had to be bribed to participate, yet some still would not. And the result was not successful, as we have seen.

Proposed cap‐and‐trade within the United States would be even more complex than “Kyoto.” […]

Fee‐and‐dividend, in contrast, is defined by a single number: the fee (tax) rate that the fossil fuel companies must hand over at the first sale of oil, gas or coal…

International agreement requires principally that the United States and China agree to apply such internal fees across the board on fossil fuels at the mine or port of entry. Agreement on such action is in the best interests of both nations, making it far easier to reach than agreements on caps…

Next, and this rebuttal is the key one,

Krugman Argument #2: Cap‐and‐trade and fee‐and‐dividend are really equivalent.

Krugman says that the fee‐and‐dividend I propose is “essentially equivalent” to cap‐and‐trade. Here I may not have been clear. I do not dispute the economic theory that a cap and a fee are, in principle, equivalent. But cap‐and‐trade’s complexity allows special interests to take over, killing its effectiveness.

The devil is in the implementations…

One can appreciate the difference in transparency by comparing the 2,000‐page Waxman‐Markey cap‐and‐trade bill with the simplicity of a single fee (tax) rate on fossil fuels. With fee‐and‐dividend we know who gets the money – equal amounts to all legal residents…

Finally, he disagrees with Krugman’s lack of concern over Wall St’s involvement in these markets. Although he only gets to it in the conclusion, my core concern with the market’s involvement in carbon is, as Hansen says,

Caps inherently cause prices to fluctuate wildly. Even if legislators attempt to outsmart the market by building in limits on the fluctuations, there is still uncertainty in the impact on energy prices. Business people need to have confidence about how prices will change in the future. Ditto, the public.

I think Hansen wins on the technical points about which is better. I wonder if fee-and-dividend can pass, primarily because it gives less to special interests.  However, W-M might be DOA in the Senate anyways, and I think the idea of a public dividend can make the bill more palatable to the fossil fuel-dependent constituencies (read: voters, not dollars).

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EconoSpeak has a post with some basic S/D diagrams that lay out the economic arguments for tax versus cap-and-trade, which in large part hinge on uncertainty. The basic takeaway is that given the uncertainty about the ‘demand’ for emitting carbon dioxide, we’re better off with cap-and-trade, as it eliminates quantity uncertainty. The argument for a tax, then, is that the economic cost, not the environmental cost, is what should be limited with certainty.

However, the Lohmann paper I approvingly posted on last week argues otherwise. Not all carbon emissions are the same, nor are all offsets:

it matters not only how much emissions are cut but also how they are cut…cap and trade is designed to treat emissions-reduction measures as equal, regardless of whether they are likely to contribute to unquantifiable but important positive global synergisms…

the fact that there can be no firm basis for offset accounting opens the way for unresolvable conflicts over estimates of carbon credits.

So, in fact, cap-and-trade does open the door for significant quantity uncertainty. In Lohmann’s view, carbon accounting creates a false sense of security about the true amount of emissions deferred by an offset. A good analogy is the false sense of certainty about risk that VAR gave many investment bankers in the buildup to the economic crisis.

The alternative, it seems, is a more flexible tax. As it turns out, one doesn’t have to believe that ‘markets are poison’ a la Lohmann to advocate a tax. Brookings’ Ted Gayer (whom I unknowingly sat next to at the Saez seminar I posted about), has testified to Congress in favor of a tax. He argues that the tax would help lower deficits for the US, reduce reliance on offsets (about whose integrity, he argues, there are real concerns), and avoid some of the disruptions from price volatility.

Problematically, “tax” is a dirty word. Of course, when Sarah Palin is taking over the WaPo op-ed pages referring to cap-and-trade as “cap-and-tax”, perhaps this issue should be less of a concern.

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Following up on my last post about carbon commodification, I’ve read that Naomi Klein (author of No Logo) is going to take on the free market approach to climate change in her next book:

The Toronto-based journalist and activist says advocates for market-based solutions like carbon trading will face-off against those who believe a longstanding “climate debt” obliges rich countries – which produce most pollution – to fund sustainable environmental futures for poorer countries, which suffer the most ecological damage.”It is absolutely going to be a war in Copenhagen,” Klein says in a recent interview…

“You have this generation of young people whose views of the market and the economy have been profoundly shaped by this meltdown and by witnessing massive inequality and even witnessing this so-called recovery,” says Klein, who speaks regularly at university campuses…

“I’m very excited by the idea of climate debt…. This accounting could lead to serious funding for countries to leapfrog over fossil fuels. It isn’t just a punitive measure, it has all kinds of possibilities that benefit everybody.”

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A friend who works in energy consulting (specifically focusing on carbon offsets) has sent me a thought-provoking and troubling paper on cap-and-trade legislation and the weaknesses of the carbon market/offset system it creates. Larry Lohmann, the offer of the paper, casts a political economy lens on this system and critiques it in light of the lessons the economic crisis has taught (some of) us- the paper is long, but you can get the gist from the 2 or 3 bolded sentences on the margin of each page.

The main critique of the cap and trade system is that it engenders creation of

highly abstract commodities, partly through quantist procedures characterised by suppression of unknowns, contested quantifications and lack of transparency.

The abstraction is typical of neoclassical economics, which as we’ve discussed in critiques of GDP, seeks to quantify everything in money so that it can create commodities. The paper cites Polanyi a number of times, who was the foremost political economist that spoke against creation of fictitious commodities. The problem with the commodified carbon (as with MBS et al.) is that quantification likely obscures more than it reveals.

Market architects abstract from the question of how those reductions are made. This distances carbon markets from the climate problem in the same way that historical labour markets, in inventing abstract labour, disconnected from and modified the significance of various concrete useful human activities of livelihood.

 These markets and the false equivalencies they entail ignore the reality that

it matters not only how much emissions are cut but also how they are cut…cap and trade is designed to treat emissions-reduction measures as equal, regardless of whether they are likely to contribute to unquantifiable but important positive global synergisms.

What are the consequences of going forward with such a system?

First, the fact that there can be no firm basis for offset accounting opens the way for unresolvable conflicts over estimates of carbon credits…

A second consequence of offsets’ reliance on an unworkable, self-invalidating
calculation methodology is that it undermines the possibility of effective regulation…

A third effect of an untenable quantist methodology is that it stores up an asset valuation problem similar to that of sub-prime mortgage-based securities before the 2007-08 financial crash.

Lohmann charcacterizes the emphasis on quantification and markets as part of a neoliberal ideology extending into the realm of climate change mitigation. He notes that this new conventional wisdom appears to have won out, as

Within the insular, tightly-knit professional climate mitigation community,
experts are constantly passing through revolving doors between private carbon trading consultancies, government, UN regulatory agencies, the World Bank, environmental organisations, official panels, trade associations and energy corporations.

This message is difficult to stomach. I am naturally inclined to solutions that seek to quantify everything, because I tend to value simplicity and elegance. I’m beginning to realize, however, that most of the time complexity trumps simplicity, and that economics seems to favor simplicity to a fault.

I also have a hard time reading this paper without thinking that Waxman-Markey might actually be detrimental in the long run, but entrenching far from good enough policies. Perhaps the recently invograted 350 ppm movement can allay some of these concerns by making the caps aggresive enough to force real, long-term change, regardless of what market participants want. I’m not optimistic that it can succeed in raising (lowering) the bar, though, because it seems even a weak bill like W-M will have a hard time passing the Senate.

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In MRZine, Simon Butler reviews John Bellamy Foster’s new book, The Ecological Revolution: Making Peace with Our Planet. Butler begins,

The ecological crisis is not simply the result of poor planning or bad decisions.  Nor is it an unforeseeable accident.  It’s the inevitable outcome of an unjust economic and social system that puts business profits before all else — even as it undermines the natural basis of life itself.

Any neo-Marxian take on pretty much anything is going to present some (should I say?) inconvenient truths, and by Butler’s account, it seems Foster’s book it no different.

The Ecological Revolution is a call for urgent action and an intervention into the debates about the kind of action needed to win this “race.” […]

The upshot is that two distinct visions of ecological revolution have emerged.

The first tries to paint business as usual economics green.  The second, following Che Guevara’s maxim, holds it must be a genuine eco-social revolution or it’s a make-believe revolution.

“The conflict between these two opposing approaches to ecological revolution,” writes Foster, “can now be considered the central problem facing environmental social science today.”

Probably my favorite parody of the first approach is found in an episode of 3o Rock, in which General Electric attempts to push a corporate-friendly “green” message with the character Greenzo, who turns out to be a more rogue, deep green version of what was expected. Of course, beneath the surface of this first approach is a “green industrial revolution,” in which,

the driving force of sustainable change is not the goal of preserving life, improving society, or allowing for the full development of human potential, but the profit motive…

All assume that economic growth, the expansion of markets, and the unlimited accumulation of capital can continue…

As a way to deal with the planetary emergency, such market-based responses are absurd, irrational, dangerous, self-defeating, and destined to fail.  They have also been warmly welcomed by the world’s capitalist governments and provide much of the basis of false responses to climate change such as carbon trading and “clean coal.”

John Bellamy Foster aptly sums up the capitalist economics of a market-based green industrial revolution as “the economics of exterminism.”  He advances an alternative approach that puts ecological concerns above capital accumulation.  We need “a more radical, eco-social revolution, which draws on alternative technologies where necessary, but emphasizes the need to transform the human relation to nature and the constitution of society at its roots.”

Probing socio-economic relations, Foster writes,

‘At the planetary level, ecological imperialism has resulted in the appropriation of the global commons (i.e. the atmosphere and the oceans) and the carbon absorption capacity of the biosphere, primarily to the benefit of a relatively small number of countries at the center of the capitalist world economy.’

Foster also draws on two concepts from Marx:

The treadmill of production refers to capitalism’s core impulse to expand production without regard to natural limits to growth set by the biosphere.  This impulse makes the process of capital accumulation inherently unsustainable and anti-ecological…

The metabolic rift refers to Marx’s theory that capitalist production necessarily creates a sharp break in the relationship — the metabolism — between nature and human society.  Marx used the concept of metabolism to describe the complex and co-dependent union between humanity and the environment.

So what’s the key Marxian insight for ecology?

Unlike mainstream economic approaches, Marxists hold that private ownership of natural resources is the major barrier to dealing with environmental problems.  In the third volume of Capital, Marx even compared the relationship between nature and humanity under capitalism to slavery.

And the goal?

“The goal,” Foster says, “must be the creation of sustainable communities geared to the development of human needs and powers, removed from the all-consuming drive to accumulate wealth.”

So it’s not surprising that Foster writes that the solution “is now either revolutionary or it is false.”

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Nate Silver (of election projection fame) has an excellent post demonstrating the shortsightedness of harping on GDP numbers, in this case with regards to climate change. He takes to task Jim Manzi, whose argument is that even pessimistic assumptions point to a 5% reduction in GDP from global warming down the road. Silver endeavors to demonstrate that a 5% reduction in GDP can have extraordinary human costs, by taking low-GDP countries off the map. He manages to wipe out 43% of the Earth’s population.

I think Silver’s point provides a much needed dose of realism in looking at economic data. If someone told you upfront that global warming will kill upwards of 2 billion people, rather than reduce GDP by 5%, they would be much more apt to take action. Or, if we relied on a measure like Green GDP in our national accounts, and learned that GGDP would actually decrease by, say, 30% if we didn’t act on climate change, then again, we would be more ready for action.

GDP seems like a nice idea as an all-encompassing (and seemingly neutral) means of measuring the value of all the goods and services that people buy. However, when it comes to climate change, informal economies, and a host of other issues, GDP comes up woefully short.

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