“People, like any creature with no natural predator, will continue to spread beyond the capacity of their environment.”
Should I live to 80, the global population will have increased fourfold in my lifetime, more than double the population when the Club of Rome called for zero growth in 1972. For the average non environmental scientist, it is easier to divide the environment into the original Greek elements: fire, water, earth and air. Fires are currently raging, considered (unscientifically) as evidence of “global warming,” modified to “climate change” when the planet started cooling. Land use is also a serious global problem as the run-off into rivers and oceans is unbounded.
People respond to visual cues: when the Cuyahoga River burned in downtown Cleveland for weeks, America cleaned up its rivers. When scientists vividly described a hole in the ozone layer, consumers replaced chlorofluorocarbons in cars and refrigerators in 1987 as part of the Montreal Protocol.
Unlike the Cuyahoga River fire, environmentalism today is rather like the US debt, another intergenerational transfer that also reflects human nature. Current sacrifices can potentially reduce the projected magnitude of sacrifices forced upon future generations, but some economists argue based on UN income forecasts that future generations will be so wealthy that the high costs we would bear today will be relatively painless in the future, the environmental equivalent of “growing out of the debt problem.”
Economists Thomas Carlyle and Thomas Malthus first introduced the dismal idea that mankind would outgrow and eventually destroy the earth’s environment several centuries ago. Harvard economics professor Robert Solow argued that productivity improvements could more than offset environmental degradation, leading to Paul Romer’s theory that there were no natural limits to human expansion.
But that didn’t fool mother nature. The Stockholm Resilience Center breaks down today’s environmental challenges into nine planetary boundaries that when crossed are irreversible. As many scientists believe at least four of these boundaries have already been crossed, they have declared the end of the 12-millenium post ice age Holocene Epoch so favorable to human development. We are now in the unknown Anthropocene Epoch, “the age of man.”
The point of their framework is to help prioritize environmental threats and responses. Climate Change is right in the middle of the pack. The thousands of professional scientists currently engaged in environmental research have provided a sufficiently robust diagnosis and basis for developing promising technical solutions. Economists are still in the early stages of cost/benefit analysis of the alternatives.
The Climate Change Crisis
The STERN REVIEW: The Economics of Climate Change provides greenhouse-gas emissions in 2000 by source and technical plans to reduce or eliminate them. About half are energy emissions: Power (24%) Transport (14%) Buildings (8%) Industry (14%) Other energy related (5%). Non energy emissions are Waste (3%) Agriculture (14%) Land use (18%) Energy emissions are mostly CO2 (some non-CO2 in industry and other energy related). Non-energy emissions are CO2 (land use) and non-CO2 (agriculture and waste).
Economists blame environmental degradation on the failure of the market to price carbon emissions, but it is worth noting that had politicians not sown unfounded fear in the wake of the Three Mile Island and subsequent nuclear disasters there would not be a looming climate catastrophe today.
In his Nobel acceptance speech, economist Willian Nordhaus provides an economic model for evaluating technical solutions to get the “biggest bang for the buck.” Economist Bjorn Lomborg of the Copenhagen Consensus offers suggestions for a total of $2.5 trillion environmental expenses with $15 returned for every public dollar invested, a 1500% return on investment (ROI).
Stanford’s Mark Jacobson also provides a complete analysis of the Climate Change problems and a blueprint of solutions, concluding that replacing all carbon based energy plants as they reach the end of their useful lives with Wind, Water and Solar (WWS) globally will keep the rise in climate temperatures within an appropriate limit (scientists debate the range between 1% and 3%) excluding any nuclear contribution due to the long implementation time, almost 20 years for today’s 1950s technology.
Earth and Water: Physical Limits Apply
Mechanized agriculture may have postponed Malthus’s day of reckoning, but it did not prove him wrong. Technology has mitigated the population’s excessive demands on land somewhat, but the supply is constrained. Most of the environmental threats to the earth and water are the direct effects of industrial agriculture, e.g., chemical additives and CO2 release, or indirect effects such as deforestation to create more arable land.
Total current global consumption is unsustainable with existing technologies and US citizens consume five times the global average. Reforestation of agricultural land (and arguably turning private forests into national parks and limiting cutting to, e.g., thinning as part of fire management) is needed to meet CO2 targets. There are numerous agricultural productivity improvements on the horizon. But even if sustainable farming can achieve the same yields as industrial agriculture, replacing chemicals with much more expensive labor, it is hard to see how the earth will sustainably support rising living standards, much less the doubling of output projected by 2050 for an ever increasing population living ever longer lives.
The Political Economy of Nation States
Historically, a primary role of nation states was to provide food and energy security for their citizens, often at the expense of other states. Four things are required of US politicians to save the planet: First, prepare the public for the necessary sacrifices; second, avoid conflicting goals and counter-productive measures; third, prioritize the problems and design workable cost-effective solutions; fourth, provide the global leadership necessary to implement and enforce global environmental policies, particularly carbon pricing, to eliminate free riders. They have failed across the board.
Science can never provide the certainty that the scope of environmental solutions warrants, but faith in science has been undermined by its political bedfellows. To generate greater public support, the public was convinced that the sky is falling (the sky will eventually fall, only after humans are long since extinct on this planet.) Some scientists who quickly aligned with politicians undermined the public’s faith in their diagnosis, which is inherently speculative, and recommendations, which often ignore economics.
Technology will respond, but for at least the next three decades the price of energy and energy intensive goods will be higher and today’s shortages will become common here as they still are in many places. Housing will be less affordable as land and lumber supply shrinks to expand forests and space for WWS. Food prices will be significantly higher as industrial methods are reduced or phased out.
Conflicting Goals and Counterproductive Policies
Politicians have sold climate change as generating jobs while pursuing social and economic justice. Under current proposals, jobs will be created in China and lost in the US as has happened for over three decades.
US per capita income is 25 times that of India. Indian energy is much more carbon intensive than the US (with a massive open funeral pyre for most of the dead). Renewable energy in India is an alternative to bring about parity, but India’s population density is twelve times that of the US, limiting land availability for WWS. But because Americans use much more total energy, Indians demand the US cut carbon energy use in the name of social justice. America’s social justice warriors may agree to cut US living standards by 80%, but the benefits aren’t likely to accrue where needed most. It doesn’t seem likely that two such different nations at such different stages of development would agree to the terms of carbon pricing and subsidies.
It makes no sense to subsidize the demand for energy, housing and food while restricting the supply. It makes no sense to allow tens of thousands of immigrants to cross the US border for a better life while demanding austerity from the citizenry. It makes no sense to require corn ethanol be used in cars when people are starving and rain forests are being leveled to farm more corn. It makes no sense to heavily subsidize luxury electric cars for people making over $140,000 a year fueled predominantly with coal and natural gas.
A Rational Cost-effective Plan
Politicians prefer to pick the winners, e.g. Solyndra and losers, e.g., existing nuclear plants. Bill Gates pointed out that shutting down these plants before the end of their useful life, as is being done in Germany and Japan after the Fukushima disaster and is being done across the United States, particularly California, is stupid. Bang for the buck and ROI are political slogans rather than mathematical requirements for political accountability. I have yet to see the proposed ROI for the $100 trillion Green New Deal.
There is no plan on the horizon that would meet the Paris Accord goals with WWS in the US or globally. It’s too early for bureaucrats and politicians to pick winners, but the US should double down on research, development and implementation for the new nuclear technologies such as the natrium reactor used by TerraPower founded by Gates and the fusion technologies. China and India are already in the nuclear club, mitigating weapons proliferation concerns. Moreover, unlike WWS which are physically limited, fusion energy is unlimited. Preferential financing for new energy infrastructure could be made available globally through the World Bank.
There is much the US can do within its shores and international sea boundaries. In addition, there are already numerous ad hoc global initiatives to save the oceans, from the whales to the coral. Their very limited hard earned success so far isn’t encouraging, but there is no good alternative. Similarly, attempts to reform agriculture since Stalin’s days have proven politically problematic, but the USDA, which has had ambassadors globally preaching and teaching industrial agriculture since it was founded, could do the same for sustainable agriculture.
Politicians can simply eliminate carbon by regulation or law, but totalitarian governments destroy their environments and such command and control (c&c) approaches haven’t worked much better in democracies. The so-called “market oriented” economic solution for carbon pricing is conceptually easy, imposing the appropriate price through cap and trade (when some firms can improve energy efficiency) or cap and tax (to reduce production until alternative clean energy comes on board) – not perfect but better than c&c. Nordhaus recommended a voluntary club to impose a uniform system globally and enforce it to eliminate free riders.
As with cap and trade, the concept is relatively straightforward. The CCC’s primary role would be to set and enforce the one true price of carbon universally. The same member price would be imposed on non-members through tariffs. Members with a big carbon footprint would subsidize those with a small carbon footprint. Members who subsidized their own labor and capitalist cronies should pay a penalty surcharge.
The Montreal Protocol succeeded where the Paris Accords, lacking teeth to prevent free riders, failed. The stakes are much higher because the potential consequences of universal carbon pricing are huge: Had Europe and the US imposed the true price of carbon, including transport costs, on China 35 years ago when it joined GATT, the WTO predecessor, would it have evolved into an export powerhouse at the expense of traditional producers, pulling hundreds of millions out of poverty in China while hollowing out the US working class? A large share of trade under the TPP is arguable due to underpricing carbon as well.
The UN is currently the only global political body, but the US would not delegate such powers to it. A CCC would need the independence of the IMF to enforce draconian penalties. But the US hasn’t shown leadership on carbon pricing and has recently fallen from its WWII zenith to its post Afghanistan nadir. The industrialized nations would never grant it the required enforcement powers to eliminate free riders.
The Way Forward
Politicians prioritized climate change over scientifically higher priorities for water and earth, presumably because as a “crisis” it provides unlimited opportunities for crony spending with little accountability for achieving an objective beyond their political horizon. But without a mandatory international system, the climate change agenda is on life support. Germany has now tied its future to Russian carbon, and the rest of Europe might follow. The US should do no more than what’s in its own direct interest on climate change: the cost of a quixotic effort to single handedly save the planet is unlimited and the net benefit small. Fusion research and development offers an expected payoff to US research funding orders of magnitude greater than WWS.
In truth, wars, pestilence, pandemics and purges may have done more than industrial agriculture to postpone Malthus’s day of reckoning. The current mainstream view is that China saved its trade surplus to build a navy to control the seas and the Biden Administration expects war. As the US is already swimming in debt, the US can pursue one, or – assuming it is uncharacteristically efficient – at most two of the following priorities: national defense, rational domestic environmental policies and/or domestic socialism.
War has always been an ecological disaster. Perhaps the ecological future of the US lies with biological warfare (which both China and the US are currently working on) and the neutron bomb?
Kevin Villani, Chief Economist at Freddie Mac from 1982 to 1985, has held senior government positions, has been affiliated with ten universities, and served as CFO and director of several companies. He recently published Occupy Pennsylvania Avenue on the political origins of the subprime lending bubble and aftermath.