One idea that seems to be working well for the Americans is Green Collar Jobs. In a slow economic climate with well paid manufacturing jobs at a premium and outsourcing being used a a boogeyman an idea that combines big industry, economic growth and domestic production is bound to do well. My only quaestion is why have the americans come to this so soon after the seriousness of climate change has been established while us in Europe still havent found a way of broading climate friendly policies into a mainstream political force? Perhaps we can learn something from the Yanks.
The Way to Go: Resolving or Addressing Externalities.
The typical view of politicians and economists in the UK, backed by many who influence policy, is that climate change is the greatest market failure ever and that we need to internalise the price of carbon. For those of you unfamiliar with the economics jargon the we say a cost is interalised when the negative environmental damage suffered by broader society is borne by a company not the broader public, and the price of the product reflects this. Throughout most of the world carbon emissions place a cost on the public but not on the company doing the polluting, or the consumer of the relevant product; the cost is external to the transaction.
Internalisation of the cost of carbon is an obvious minimum requirement to be placed on business, broader society should not bare the burden of polluting practices. However, there is a more serious critique of externalities, namely that externalities are numerous and that they are placed on the public by private enterprise. We can address many of these issues as they become politically prominent but should we not aim to resolve the problem of externalities rather than addressing them as they arise? There clearly seems to be a problem in broader economic functioning when externalities can arise. If we compare the situation to that of insurance we can consider externalities to represent damage to communal property and businesses the vandals. If the vandals are caught then they will tagged and forced to pay for any future damage. But we aren't very observant and every day that these externalities build up society is subsidising those who own business. There is a risk involved in having a society where externalities can exist, and this risk favors the wealthy.
I am concerned with questioning the narrow conversation about externalities, not with arguing for an overthrow of capitalism whatever that may be. In fact, my conviction that externalities are more than a problem to be addressed one by one stems from the failure of state socialism.
Stalin may have asked for a quantity of carpet. A million square meters at first. He would in all likelihood have then been informed that a million square meters of carpet as thin as a cloth had been produced. Perhaps a request for carpet by the tone wold have then been given, of course now the exact opposite would be likely, a carpet so thick that the best palaces would envy its luxuriance . Perhaps a thickness would have then been defined, only to result in a perfect thickness with the poorest thread, did anyone ask for good thread? This kind of story is often told as an explanation for why markets are preferable for allocating economic resources. If the weaver had to sell the product people would simply pick the carpet that best met there needs.
I see parallels between a command economy, and the creation of markets that are prescribed as a means of internalizing costs. Commodifying soil , water and air to reduce pollution is a deconstructionist and arbitrary process on a planet with intimately interwoven systems.
It seems to me that we have a political problem. Consideration of who is making the important decisions is the means by witch we will solve our problems. Emphasis on involving local communities in projects and good science in policy discussions are two small moves towards resolving the issue of --not addressing the consequences arriving from--externalities
The 2008 Budget is out tomorrow and the prospects of green tax hikes are about as popular with the right as they are with me. The problem seems to be that the government cant stand raising the main taxes so they go after alternative revenue streams from a variety of sources. This is quite a contrast to the idea of keeping the budget under control and then reshaping it to reflect priorities. If the governmentcynically exploit the label green then they will damage the true idea in the process.
Some good green taxes would include:
A tax on aviation fuel, putting it in line with petrol, the hypothication of this towards our rail services would make it a real green tax.
An across the board carbon tax at the level of fuel purchase. Reductions in council tax or the rate for the lowest income tax band would make this a popular scheme.
A differentiation of vehicle excise duty (VED) so that those with highest mileage are free and those with the lowest mileage are really expensive range £0-3000 per year.
A vehicle sales charge on polluting vehicles, the revenue from which is used to subsidies less polluting vehicles.
Some measures deal with green issues without tax:
A free energy audit and installation of draft stripping, insulation and other air tightness measures. Offered as an alternative to winter fuel payments which require funding every year due to poor building stock.
No new roads. Funding for roads diverted to cycling, walking and public transport schemes.
What do the papers have to say?
The Telegraph states that the widely anticipated rise if fuel tax may not materialise due to high oil prices.
"Alistair Darling does want to send out a signal that fuel use needs to be cut and people have to pay for the environmental damage. However, previous fuel duty rises have been delayed."
The Guardian points out that a forecourt fee is likely to be introduced for the most polluting vehicles.
"The chancellor will present a report on "decarbonising road transport" prepared for the Treasury by Professor Julia King which recommends measures such as a "showroom tax" on the most gas-guzzling cars to discourage consumers from buying them. The £2,000 figure being speculated on at the weekend is thought to be on the high side, however."
The Daily Mail points out in a surprisingly sane and analytical article that the charge for gas-guzzlers will apply to band G vehicles. I would be interested in the average cost of a band G vehicle and how a relatively small charge will effect purchases. It is also noted that a tax break for clean cars is expected. A tax on aviation based on flights not people is expected; this tweak acts as a motivator to full planes.
"Buyers of new 'gas-guzzlers' in car tax band G - including Range Rovers and other 4x4s - will be hit with a first-year charge of more than £1,000 in vehicle excise tax, before it reverts to the current level of £400. Drivers with green cars will see their tax bill fall."
New aviation taxes will encourage fuller flights and we could well see green rules covering the sale of commercial property.
The Daily Record points out that Darling is likely to get publicity by announcing significant increases in winter fuel allowances: an awful move people need warmth not fuel.
The Tories say he will unveil a headline-grabbing rise in the winter fuel allowance for pensioners.
Princeton University Professor and NYT columnist Paul Krugman speaks about the end of the New Deal post-war consensus and the rise of a new Gilded Age.
Cap and Trade, Green Tax Switch, Ineqaulity and International Climate Funds.
A short time back i was asked to contribute one simple policy to a website called 'day one' that is seeking to concentrate suggestions for day one of the next US presidency.
My suggestion was:
"I suggested taxing pollution more and income less. Income tax would be reduced most at the lower levels of income to overcome the regressive nature of a carbon tax. This 'green tax switch'is one no brainer that every country should adopt in combination with other measures."
After all my recent reading and video watching on ineqaulity recently I think it's fair to say that i would go beyond simply balancing the regressive nature of a carbon tax with the progressive nature of income tax cuts for the poor. I would create a dramatically progresive system to counterbalance both structural economic feature disadvantaging the poor and the current tax system that steals from the poor to give to the rich.
I would like to thank Christopher Mitchel for passing on this link to me. The New Rules Project sketches out a cap and trade scheme based on an auction of permits with the revenues being recycled into the economy as suggested be me for a carbon tax.
It really dosent matter to me if this scheme is followed or a carbon tax approach is used for funding tax cuts for the poor. What i would say is that both a carbon tax and a cap and trade scheme are needed, and one of them will need to fund projects agreed on internationally. Adaptation and clean development in the global south require significant revenues. Politicians have proven appauling at looking through their domestic budgets and finding a little slack so they can fullfil their international responsibilities. However the EU ETS and some US cap and trade schemes are considering a hypothication of auction revenues for international commitments. I think that this is sensible and that as cap and trade systems are likely to all function under a post-kyoto framework it seems logical if not absolutely nessicary that they provide the funds and that a revenues neutral but progresive carbon tax recycling schemes can be a purely national matter.
Continuing my investingation of economic ineqaulity I found this video investingating the Bush tax cuts. Ineqaulity of some degree is nessicary but currently things are getting out of hand in the UK and US.
Getting serious about people to protect the planet.
John Schmitt gives a facinating talk on changes in income and wealth ineqaulity in the US since the second world war.
I seem to be following US economic policy more closely that that in the UK as materials are better available. The US may now be in a recssion but even before this period Americans didn't feel as wealthy as national economic growth suggests that they should. Why arent Americans feeling welathier?
The answer comes down to distribution of income. In perticular the establishment of govornment policies that actively shift power to the wealthiest 5% and even more so to the wealthiest 1% of the population. It is a great irony that in the early 80's when the post-war boom had subsided the presumed saviour of the economy Ronald Ragan was voted into office. Ragan presided over an economy growing steadily, whilst at the same time singularly failing to pass on this growth to the vast majority of the population. So whilst the economy has grown from 100 units to 167 units per capita the feeling is very different:
"We are a very much richer country now than we where 25-30 years ago. And i think one of the great ideological victories of the rights is to persuade us somehow that we dont have the resources or the abillity to be able to afford the things that we used to do...that we cant afford the education, or the social security sysem...and i think that is an incredible misrepresnetation of the economic situation on the united states."
US GDP was 100 uits in 1979 and 167 in 2004. The image bellow shows the wage growth at 10th, 50th and 95th percentile. Wages have decreased slightly for the poorest, risen about 10% for the median and about 30% for the top 10%: despite 60% growth in wealth!
All of these figuers are however poor when compared to growth in GDP...the full increase in wealth reaches the top eschelons not through wages but through invesments. Govornment policies are effectively robbing from the poor and giving to the rich (but subtly). The graph bellow shows how the wealth gains from 1983 to 2001 have been distributed. And it is this economic policy that the Republicans are falling over each other to associate themselves with! The democrats also had a role in this and they have done very little to show that they have seen the light and are prepared to do something about this appaling state of affairs and move the US away from its position as most ineqaul developed nation.
My latest interest is economic inequality. A natural next step after reading Herman Daly and his take on ecological economics and the need for a steady state economy; in a steady state economy great wealth for a few actually represents impovrishment of the poor. Even without a steady state economy the image bellow forces us to ask some significant questions...
This image is a visual metaphor displayed graphically, the metaphor is here.
Problems with GDP: Joseph Stiglitz at the Asia Society
Joseph Stiglitz, author of 'Globalisation and It's Discontents' spoke recently (full talk)at the Asia Society in New York City.
In the short excerpt bellow some of the problems with GDP are discussed, along with a facinating anicdote about how special interests have worked to protect this measure...because it is defective.
Nobel Prize-winning economist Joseph Stiglitz ("Globalization and Its Discontents") talks about his new concept of economics, "The Economics of Information," and his latest book, "Making Globalization Work" - Asia Society
Joseph Stiglitz was chief economist at the World Bank until January 2000. Before that he was the chairman of President Clinton's Council of Economic Advisers. He was awarded the Nobel Prize in economics in 2001. He is currently a finance and economics professor at Columbia University. He is the author of Globalization and Its Discontents and The Roaring Nineties.
Economics is flawed, at least as currently practiced. Currently markets are used quite effectively to carry out the key function of resource distribution. States cannot do this, as the Soviets so convincingly illustrated. However, distribution of economic resources is not the only problem that we need to solve.
If you are a traditional economist then the two areas of concern are:
Distribution of resources efficiently. (this gets all the atention at present)
Allocation of wealth. (Ineqaulity in excess leads to low economic productivity)
If you are an ecological economist then these two issues are joined by a third
Scale. (if the physical limits of the planet are to be considered there is an optimum scale for the economy; with a given distribution and allocation pattern a variety of standards of life are possible depending on scale)
This is best explained by means of an analogy:
Boat's have a plimsol line. You can add goods to the vessel untill the water reaches this level. If you are careful and distribute the goods evenly over the vessel you may carry more than if the weight is to one side. The weight is analagous to the economic activity, the boat our planets carrying capacity and the distribution is the perfect distribution of resources in the economy.
We can stretch this analogy further to cover inneqaulity. It is well known that a unit of wealth for very poor is more productive than for the wealthy. If you give a poor farmer $500 dollars he may be able to transform his livelihood, the same can not be said for a millionaire. So if we imagine not a deck with goods to be sifted around but a series of decks where goods on the higher decks represent the wealthy we can see that this to destabilises our boat. The higher the centre of gravity the more the boat rocks, even if the load is even and not great the plimsol line will be diping into the water and tising far above.
When dealing with envieronmental issues we must embrace economics. We must say, what a facinating system, let us set it a new challange. Having largely solved distribution let us then look at scale and allocation. We must fight inneqaulity and population growth as we promote innovation and eco-efficiency.
All of this is important not only in terms of comming to grips with communal challanges but also in terms of getting such a movement off the ground. Ineqaulity has many associated malodies, it does not emerge out of thin air and the related social issues of insecurity and lack of trust are certain to promote reactionary, defencive politics not a generous progressive agenda.
The video bellow covers the current economic state of play in the US.
Panel discussants:
Alan Krueger, the Bendheim Professor of Economics and Public Policy and Director of the Survey Research Center at the Woodrow Wilson School;
Douglas Massey, the Henry G. Bryant Professor of Sociology and Public Affairs at the School;
Viviana Zelizer, the Lloyd Cotsen '50 Professor of Sociology at Princeton.
Moderator:
Stan Katz, Lecturer with rank of Professor of Public and International Affairs Faculty Chair, Undergraduate Program
Their is not much multi-media content online about Herman Daly. That's a shame as he has a lot of important ideas. However i have just found a talk that covers some of Daly's ideas.
Thomas Prugh, State of the World 2008 co-director, Worldwatch Institute, introduces (MP3) the fundamental principles of sustainable economies and outlines a roadmap for achieving them.
A positive development in UK govornment climate policy, a shadow price on carbon for policy decisions.
The "shadow price for carbon", representing the cost to society of the environmental damage, has already been agreed for every year up to 2050 by government economists. It will be set at £25.50 a carbon tonne for 2007, rising annually to £59.60 a tonne by 2050.
The climate change minister, Phil Woolas, said: "This will have huge implications for [the] government. If for instance a new power station is due to cost £1bn, but it will add £200m worth of carbon emissions, we will decide that the cost of the power station is £1.2bn, even though its cash price is £1bn. We are creating a new currency."
For a while now i have been wrestling with the idea of economic growth. In general it is said that 'old school' environmentalists are anti-growth. In the US i think most NGO's are reactionary in this regard, they have rejected this stance with some enthusiasm and taken to working with companies.
My thinking on this issue has been influence by Amory Lovins, William McDonugh, Jonathan Porrit, Herman Daly, Donella Meadows and recently by Nordhaus and Schellenburger.
Herman Daly offers the following statement which may allow a reconcilliation;
"To make this case they would have to seperate economic growth (defined as an expansion of GNP) into its qauntitative physical componenet (resource throughput growth) and it's qaulitative , non-physical component (resource efficiency imporvement)."
We can see that growth is not the same as devlopment. Growth is an increase in throughput which can lead to development or collapse due to environmental stress. Development in a zero growth manner is possible by increasing resource efficiency.
So perhaps Monbiot is with Daly in being anti-growth and pro-evelopment. This is where i stand as the laws of nature seem to demand it. It may also be where Nordhaus and Schllenburger are, and Jonathan Porrit. S&N subtitle Break Through 'from the death on environmentalism to the politics of possibility' and argue against the politics of limits. Is this whole debate cooked up, are we all after the same thing? An end to measuring gdp as wealth? Presumably those environmentalists who have thought about it can't be pro-growth in the material throughput sense?
I`m reading Limits to Growth at the moment. More on that later, for now just a note.
Limits to Growth introduces the idea of global ecological overshoot. This is a simple idea to explain, the suggestion is that there is a danger of economic growth occurring that leads to such a burden on the resources of our planet that they cannot be replenished. If this where to happen we would use up our resources until a point came when they where no longer there. Simple right? Now there are many people who say that we are currently in such a position, that we are overshooting, Jeff Sachs--head of the millennium development goals--is one. But perhaps you don't believe him that we are at 130% of the capacity of the planet and therefore meeting 30% of our needs from finite resources, i have a simpler argument.
The things needed for overshoot are...
Rapid change.
Limits to that change.
Errors or delays in perceiving the limits and controlling that change.
Given these pre-conditions for overshoot i`m worried. I`m not completely confident that a significant portion of our current resource demand is above and beyond what can be replenished. But as GDP is a good measure of physical throughput and as global GDP is currently increasing it is likely that by 2050 due to compound interest the economy will be 4-6 times the size that it is now. So it seems incredibly unlikely that all those doing ecological foot printing are wrong enough for the global economy not to be on a path to overshoot. Furthermore do you believe that we have an institution that could look at the rate of global economic growth and limit that? I don't think that we have a system for limiting change--damaging or otherwise.
Ceres has just released a report on the banking industry and climate change. Ceres descrbies itself as follows:
"Ceres (pronounced “series”) is a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change."
"According to a report released Thursday, a handful of banks have developed specific climate-related policies or strategies, while some have created working groups and executive positions to focus on the issue.
Commissioned by Ceres, the report looked at 40 of the world's largest publicly traded banks and financial services companies, including Goldman Sachs Group Inc, Merrill Lynch & Co Inc and Royal Bank of Scotland Group Plc .
Slightly more than half of the banks surveyed offer climate-specific funds and similar products, said the report, which was authored by RiskMetrics Group.
Ceres also found a number of banks, including Royal Bank of Canada and Wells Fargo & Co, are formally calculating the risk they take when lending money to companies that could be affected by carbon dioxide regulations.
But the study said banks should explain how they are factoring carbon costs into their financing and investment decisions, especially for energy-intensive projects that pose financial risks as environmental regulation increases."
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