Thursday, March 14, 2013

What I Learned About Climate Change this Year

I just finished teaching a two-quarter class on climate change, and here is my most important takeaway.  Going in, I knew the main aspects of the science and how much risk we face.  I also knew the main policy levers and, in general terms, the pluses and minuses of each.  What I didn’t know then, but know now, is the enormous mismatch between the obligatory greenhouse gas mitigation timetable and the energy transition timetable.

The first is about the targets we need to reach in order to keep climate change unpleasant but manageable.  For a very stringent version, see this analysis by Kevin Anderson.  Here is one of his mitigation scenarios:

This is a set of global pathways.  Reductions begin in 2020 (riotous optimism in my opinion, but why not?) and reach their goal by 2040 or so at the latest.  The different colored lines represent different assumptions about climate sensitivity.  If we're lucky and the least sensitive relationships apply, we get the purple line.  If the news on the science front turns out to be worse, we could end up with the red or blue, which basically fall off a cliff in 2020.  That is not a representation of policy but catastrophe.  It is unimaginable, in fact.  So stick to your optimism and color the science purple or green.

The second timetable is about the replacement of carbon-based energy and the infrastructure it rests on with carbon-free energy, along with its infrastructure, and expanded to meet the needs of the hundreds of millions of people who lack adequate energy supplies today but will acquire them tomorrow.  I haven’t seen a particular visualization that jumps out at me, but everyone who studies energy systems agrees that it will take many decades to innovate, deploy and scale up new energy sources, along with the investments we need to make to achieve greater efficiencies in using energy to meet human needs.

If our reduction in fossil fuel use is limited to the progress we make in substituting non-carbon energy, we’re cooked.  Literally.

Before teaching this course I didn’t realize how bad this mismatch truly is.

So, if we want to avoid carbonapocalypse, we will have to do without some stuff for a while.  This was one motivation for my Green Keynesianism post: one of the goals of economic policy around climate and the macroeconomy is to make it possible for people to do the kind of expenditure-switching that can maintain incomes and employment—and quality of life—even as the energy-dependent part of our economy is pinched.

It is also behind the posts I’ve written to more carefully distinguish mitigation from adaptation in carbon policy.  Unless we turn to geoengineering or sequestration, there is only one form of mitigation: leaving fossil fuels in the ground.  Supplying clean energy and improving the efficiency of energy use are not mitigation.  They can lead to mitigation if they result in more carbon staying put in the lithosphere, but only then, and only to that extent.  This is important not because I like to split hairs, but because energy transition alone will not be enough to do the job.  To understand this, and to feel it deeply enough to get you to do something about it, you need to have an absolutely clear sense of what the job actually is.

To repeat what I’ve said before, none of the above should be taken as criticism of all the activism and policy intelligence around energy transition.  We absolutely need to replace carbon-based fuels with clean ones and revolutionize our heating, transportation and other systems as quickly and massively as possible.  This is for two tightly connected reasons, to preserve and enhance our quality of life in the face of the climate challenge and to promote the political will we must somehow summon to enact the restrictions that will force most of the carbon now buried to stay buried.  Adaptation, which is what energy transition comes down to, is not a dirty word.  The problem is, mitigation demands more.


Sandwichman said...

"So, if we want to avoid carbonapocalypse, we will have to do without some stuff for a while."

Do without stuff but not without economic growth, eh? -- because "economic growth is growth in value, which means anything people are willing to pay for, and not necessarily 'stuff'."

So then if I call a cow's tail a leg, it has five legs?

I received notice yesterday that the late Jonathan Rowe's Our Common Wealth has been published. I was very fortunate to have met Jonathan a few times and on several occasions we got into those intense conversations you can only have with someone who has thought and cared long and deep about the things you have thought and cared long and deep about.

Jonathan was one of the co-authors of the 1995 Atlantic article, "If the GDP is Up, Why is America Down?" A chapter in the new book is called "Accounting for common wealth" and I'll quote the first paragraph:

"America's economic accounting is a lot like Enron's before the dam broke. There are missing ledger pages that would show a hemorrhaging of debt, and a special entry called 'externalities' into which hidden obligations are stashed."

The last time I talked to Jonathan was in October 2010 at the Mesa Refuge in Point Reyes Station, California. A couple of weeks later I sent him my thoughts on economic growth and the problem of double counting. Here is the key paragraph in my email:

"I've encountered the problem of double counting so often that I'm beginning to suspect that it is not only inevitable in social accounting but almost invisible. What this is leading me to is the idea that 'externalities,' like pollution are not the regrettable side effects of economic growth that both critics and proponents of growth suppose they are, but have become the secret vehicle by which a surrogate for economic growth can be sustained beyond the inherent limits of real growth. That is to say, real growth of GDP is limited by habits, needs, population, resources and the distribution of income. These natural limits to growth can be evaded for a long time by simply shifting the boundaries (and the costs) so that a proliferation of what should be classed as intermediate goods can be written into the books as final consumption goods."

In my email, I remarked that I hadn't yet come across a critique of GDP that specifically addressed the double-counting problem as the key that unlocks the enigma of "growth." Since then, I've encountered Hueting's analysis of asymmetric entering, Bartolini's of negative externality growth and, of course, Kuznets's classic 1947 critique of the Commerce Department's NIPA accounts.

Getting back to your realization that "we will have to do without some stuff for a while", it seems to me that the real issue is WHICH stuff and just who do you mean by "we" (kemosabe) and the only way to address those issues is with a social accounting system that doesn't stash externalities in a secret place. That means "anything people are willing to pay for" doesn't cut it as a criterion for value.

Sandwichman said...

From "If the GDP is Up, Why is America Down?"

"Once you start asking 'what' as well as 'how much' -- that is, about quality instead of just quantity -- the premise of the national accounts as an indicator of progress begins to disintegrate, and along with it much of the conventional economic reasoning on which those accounts are based."

Peter Dorman said...

First off, I personally put no stock in GDP per capita as a measure of human well-being. It's a measure of market income, very useful when what we are interested in is market income, useless otherwise. If I charted my own personal well-being over time and compared it to changes in my market income, I'm not sure I would see much of a connection. But austerity, which doesn't single out only the bad stuff, is not the answer.

Second, it should be obvious from what I wrote that this is an issue of what and not how much. An economy only half our size per capita that kept the same proportion of carbon-based production and consumption would still be "too big". An economy 50% bigger that achieved massive expenditure-switching to carbon-free goods and services would be sustainable.

And, yes, I miss Jonathan too. He was a wonderful, thoughtful guy. He helped me understand issues related to the commons better, and you'll see his fingerprints in my textbook. I tried to nudge him a bit when we were discussing his book, and I'll be interested to see how much he incorporated.

Sandwichman said...

"It's [GDP] a measure of market income, very useful when what we are interested in is market income, useless otherwise."

That's where I think you're not following what I'm trying to say, Peter. Obviously we agree that GDP is not a good measure of human well-being. But the issue of double-counting is not simply a matter of the discrepancy between well-being and market income. It reflects a fundamental flaw in the definition of income used to construct the statistical aggregate.

In his The Nature of Capital and Income (1905), Irving Fisher identified the faulty definition of income as the source of the double-counting fallacy (pp.103-108). "Like most familiar notions," Fisher wrote, "the notion of income seems to the uninitiated clear enough without definition. But pitfalls which are unseen are for that very reason all the more dangerous."

Fisher went on to analyze the pitfalls in the concepts of income as "money income" and of "real income" as a heterogeneous combination of goods and services. This critique is not confined to such subsidiary notions as non-monetary costs and benefits, externalities or the provision of public goods as intermediate goods. It has to do expressly with the inadequacy of the customary definition (or lack thereof) of market income. So it's not just a matter of undervaluing the commons, discounting social and environmental costs and focusing exclusively on monetary transactions. It is also -- primarily even -- a matter of faulty accounting for those things purportedly measured by the monetary transactions.