December 3, 2007
Bleating about Bali
I won’t make sarcastic comments about the "carbon footprint" caused by all those world leaders convening in Bali to discuss climate change. Everybody else has already made the same point. Plus, I hate the phrase "carbon footprint". And I have some sympathy with the urge to visit Bali. Its a really nice place - the Four Seasons in Bali is probably the best hotel I have ever stayed in. I wish the delegates joy of it.
But all the bitching about Bali is in danger of obscuring the real point. Climate change is a really, really serious threat - and it is good that world leaders are at least trying to do something about it - even if they have chosen to meet in a luxury resort. Let me direct you to two articles that I think give a good idea of what is at stake.
The first piece is by Nicholas Stern, author of the eponymous report on the economic consequences of climate change. I’ve seen Stern perform a couple of times, and his style is academic and dry: he comes across as the very opposite of an hysteric. So when he warns that by doing too little about global warming - "We risk damage on a scale larger than the two world wars of the past century" - it is quite sobering.
If you want a more detailed idea of how that damage might manifest itself over the next 30 years, take a look at an article in the latest edition of the "Washington Quarterly" about the national security implications of climate change. By framing global warming as a question of national security, the authors clearly hope to convince Pentagon-types that they too should be paying attention. This is not just an issue for Greens and liberals. The piece is co-authored by John Podesta, who was once chief of staff for Bill Clinton, so I think it gives a good indication of how seriously senior Democrats are taking global warming.
Podesta and Ogden paint a portrait of a "world in which people and nations will be threatened by massive food and water shortages, devastating natural disasters and deadly disease outbreaks." They flesh out this alarming generalisation with detailed examinations of how desertification will affect - for example - Nigeria or China. And they examine what the economic and political consequences of these changes are likely to be. It does not make cheering reading.
The sad thing is that I have very little confidence that Bali will really produce something worthwhile to ward off the worst risks. There are two obvious problems. First, while politicians like to talk about the long-term, they are short-term animals. Faced with a choice of curtailing economic growth now - or passing a risk onto future generations, they will almost always find reasons to do the latter. Second, I cannot see a way around the developing world V rich world problem. Stern argues that the most equitable solution would be for the richest countries to bear 80% of the burden of carbon-dioxide emissions reductions. Try selling that to the voters of Iowa and New Hampshire.
Excellent, to-the-point article by Stern. Less edifying to see how many of the (hundreds of) comments that follow it are devoted to bashing Stern (”he would say that wouldn’t he”) and whining about who exactly is “rich” in the world.
Awarding Al Gore the Nobel Peace Prize may come to look very prescient. Because in the end global warming is surely not about the environment. It’s about resources, and risk, and political stability.
Posted by: Rollo | December 3rd, 2007 at 8:06 pm | Report this commentIt is all about not including externalities in the cost of goods.
Stern is correct when he writes:
“The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay. Climate change is a result of the greatest market failure the world has seen.”
This is the “Tragedy of the Commons” (”that which is common to the greatest number has the least care bestowed upon it”) written on a before unimaginable scale due to effects of the petroleum age, the use of coal for power in the PRC and the advance of containerized shipping technology (which drastically reduced transportation costs so that they became a de minimis part of the overall cost of manufactured goods).
Once the external costs of pollution (health problems and environmental degradation) from manufacturing were recognized in the West, the West exported its most energy intensive and polluting industries to the emerging markets, primarily the PRC. As a result, over the past decade, the environment in China has been devastated and millions of Chinese have died from pollution-related causes (and birth defects from pollution related causes have risen by about 40% since 2000 according to the South China Morning Post — leading to tens of millions of children with birth defects) so that Western consumers (mainly Americans) can buy cheaper goods at Wal-Mart.
Ironically, this export of pollution costs has had a rebound effect on the US. Residents of the main West Coast port in the US, Long Beach, are seeking to regulate the pollution generated by ships (ships use bunker fuel which is much more polluting than diesel or gas) arriving with imports (mainly from China) because they “are not willing to have their children suffer respiratory problems so that people in Kansas City will have cheaper tv sets.”
A first step would be actually calculating the real cost of goods with the externalities included (of course, two years ago, the PRC tried to calculate GDP on a green basis and gave up because it would have turned 10% growth into 2% growth).
kc
Posted by: kc | December 3rd, 2007 at 9:35 pm | Report this commentI share GR’s pessimism about the prospects for Bali. Bush’s negotiating team continue to use delaying tactics, and until the US (and West in general) takes leadership on this issue (as they committed to do in Rio in 1992), countries from the South won’t be inclined to discuss taking on targets themselves.
This is problematic on many levels. Coming from the corporate sector, this leaves us with the desire to invest and act appropriately, with pressure to decarbonise, but no prospects for regulatory clarity going forward. This is a real impediment to incorporating carbon into our long-term investment decisions.
Reading the Stern article that GR referenced, I was astonished at the quantity and intensity of the vitriol of many of the commentators. Comments claiming that climate change was a socialist, anti-capitalist consipracy theory, and that big developing countries should reduce emissions before the West abounded.
From an analytical, business perspective this pure claptrap. We don’t invest funds in emissions reductions if there’s no need to do so. We’ve analysed and debated the issues carefully with numerous other global company representatives, and recognise that CC threatens to destabilise our businesses and the societies in which we operate.
Of course scientific uncertainty remains, and the IPCC isn’t perfect, but it takes only the most cursory understanding of science to realise that in a system as complex and variable as the climate, by the time you’ve reached scientific certainty it’s way too late.
There is nothing anti-capitalist about this; it’s purely correcting a market failure, and the markets will live on. Indeed, there are a great many market opportunities created in making this transition.
It really does beggar belief that people still advance such intemperate, unbalanced, paranoid, ill-considered attitudes in this debate.
Posted by: DKM | December 4th, 2007 at 10:52 am | Report this commentClimate change will be solved by engineers, biochemists and other creative people. Humanities types should move over and stop infecting the world with their ignorance.
Posted by: Tom | December 6th, 2007 at 1:20 am | Report this commentClimate change will be solved by engineers, biochemists and other creative people. Humanities types should move over and stop infecting the world with their ignorance.
Posted by: Tom | December 6th, 2007 at 1:20 am | Report this commentCorrect, Tom, but don’t include economists among your “humanities types” - engineers, biochemists and other creative people can and do achieve marvellous things, but they’re more likely to do so given a hard (ie financial) incentive
Posted by: Ilia | December 6th, 2007 at 9:22 am | Report this comment