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Tuesday 20 Feb 2018 | 13:12 | SYDNEY
Tuesday 20 Feb 2018 | 13:12 | SYDNEY

Martin Wolf's climate pessimism examined



28 May 2013 09:07

Nicholas Gruen is CEO of Lateral Economics, Chairman of the Australian Centre for Social Innovation, an entrepreneur involved in a number of internet startups, and a regular Fairfax columnist.

I was contemplating writing a post on Martin Wolf's latest Jeremiad on climate change when Sam Roggeveen sent me a link to his own post asking for my response to his musings on the same subject. So here's my response – or the first part it. Let's look at Wolf's six reasons for profound pessimism, with some commentary from me along the way.

The first and deepest reason is that, 'as the civilisation of ancient Rome was built on slaves, ours is built on fossil fuels'.

This is either silly or just a rhetorical way of saying 'This time it's different because the magnitudes are so much larger'. We built our economy on steam from 1750 to 1850 but we changed, and we can change again.

A more serious point is that we can take small problems like CFCs in our stride, but CO2 is too big a meal to digest. In fact, it's far from that, economically. It's only the nasties who want you to think that decarbonising our economy would leave us with living standards similar to when our economy was last uncarbonised, circa 1800. But politically it seems too big an ask. Why? I'll get back to that in my next post.

Wolf's second reason is opposition to any interventions in the free market.

As Wolf says, 'To admit that a free economy generates a vast global external cost is to admit that the large-scale government regulation so often proposed by hated environmentalists is justified. For many libertarians or classical liberals, the very idea is unsupportable. It is far easier to deny the relevance of the science.'

Well, this rolls off the tongue easily enough, but most right-leaning types (OK, not necessarily extreme libertarians) support defence spending, which involves far more expense than we need here to deal with a market imperfection (the fact that marauders can help themselves to resources of yours if you can't punish them sufficiently for trying to steal them).

So there's something more going on. I'd suggest it isn't quite what Wolf says. Rather, climate change has become a symbolic left-of-centre issue, even if right-leaning Margaret Thatcher was one of the first world leaders to highlight it. And if there's one thing someone on the right knows, including very often even if they're a libertarian, it's that they are against the left. Being a pin-up issue of the left, climate change carries with it all sorts of political baggage that really pisses the right off. Quite a bit of it pisses me off too, but there you go. So it's not that the right really thinks that there's no role for regulation, it's just that they're pissed off with the left. They instinctively fight the left.

Wolf's third reason is the pressure of responding to immediate crises that have consumed almost all the attention of policy makers in the high-income countries since 2007. Maybe. I'm suspicious of these 'intellectual crowding out' arguments, but no doubt there's something to it.

Fourth is the touching confidence that, should worst comes to worst, human ingenuity will find some clever ways of managing the results of climate change. This is more than touching. It may well be right. Still, why risk it?

A fifth reason is the complexity of reaching effective and enforceable global agreements on the control of emissions among so many countries. Not surprisingly, the actual agreements reached give more an appearance of action than a reality.

Now we're talking; let's put this further up the list. Still, lots of international agreements are more appearance than reality (eg. the Millennium Development Goals). I find the doublespeak involved in these things infuriating, but perhaps it's better than the alternative, which is no speak. We keep grinding away, and we do tend to devalue the meaning of the words used, but perhaps that's a price worth paying. Perhaps it helps the world more than it hurts it.

Reason number six is indifference to the interests of people to be born in a relatively distant future. As the old line goes: 'Why should I care about future generations? What have they ever done for me?'

I concede there's a lot more to it than this and we shouldn't despoil the planet environmentally, but I'm all in favour of digging up as many resources as we can. Call it a loan from future, vastly richer, generations. Right now our human capital inheritance is worth over ten times the economic value of our natural resources. Our grandchildren's human capital inheritance will be ten times that again.

If you don't understand that you're grandchildren will be richer than you, you should read about Julian Simon's successful bets with discredited doomsday prophet Paul Ehrlich.

Wolf's final (and related) reason is the need to strike a just balance between poor countries and rich ones and between those who emitted most of the greenhouse gases in the past and those who will emit in the future.

Again, I disagree with Wolf, or to clarify, Wolf's statement may be correct as a description of a stumbling block, but I don't agree with its sympathy to the low income countries' case.

If climate change can be used to increase donations to lower income countries from higher income countries in ways that promote growth in the former and thus global equity, well and good. But the idea that high income countries burned the fossil fuels and so we should bear the brunt of addressing the problems they've raised is mistaken, IMO.

Why? Well firstly, we can't be held to blame for the first century-odd of doing so, since we didn't know we were doing anything wrong. More importantly, in doing all that development we came up with some kick-arse technology, almost all of which is being picked up by lower income countries for free or for massively less than it cost the high income countries to cook it up.

Since I've acknowledged that I'm OK with increased aid from the high to the low income countries (lots more is fine with me) then this argument is somewhat moot on its merits. However, there's a really important point here: as Wolf intimates, the linkage of climate change to low income countries' ambit claims for more aid has been a huge barrier to global agreement, and in its initial guise involved the bizarre situation in which low income countries, a huge majority of signatories to the UN Framework Convention on Climate Change, which is supposed to auspice the global response, were all agreed that they weren't committing themselves until they'd seen lots more action from the West, a perfect way to waste the best part of a decade as well as leave lots of baggage around to get up the nose of those on the right as we try to make progress even today.

I mean, imagine if we had a drought and we exempted the poor from water restrictions? It would be absurd, but that's roughly been the negotiating position of lots of countries for quite some time.

I don't want this to imply that I'm not aware that lots of them are doing quite good things now (particularly China), but it certainly hasn't helped us get to sensible binding commitments from low income countries, even though those commitments should probably have permitted them to increase their emissions providing they reduced emissions intensity.

But after all that, how optimistic am I that we'll find our way through? More optimistic than Wolf or Roggeveen. And what measures might we take to maximise our chances of a happy ending? Well if I told you now, you wouldn't be back to read part two!

Photo by Flickr user 'Caveman Chuck' Coker.

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