Economics and Climate Change: the no-nonsense guide.

Climate change is the biggest threat to the world. But addressing it is difficult. First it is necessary to know what causes it. The 2014 report of the International Panel on Climate Change said:

Globally, economic and population growth continue to be the most important drivers of increases in CO2 emissions from fossil fuel combustion. The contribution of population growth between 2000 and 2010 remained roughly identical to the previous three decades,while the contribution of economic growth has risen sharply (high confidence) [i.e. the scientific evidence for this statement is very good – SSM]. Between 2000 and 2010, both drivers outpaced emission reductions from improvements in energy intensity (Figure SPM.3). Increased use of coal relative to other energy sources has reversed the long‐standing trend of gradual decarbonization of the world’s energy supply. [1.3, 5.3, 7.2, 14.3, TS.2.2] ” 

Four economic approaches

Looking at the responses to climate change in economic terms, we can identify four different approaches:

1) Business as usual. Here the idea is to grow the economy so there is a surplus to invest in the technological solutions that deal with greenhouse gas emissions. A variant on this is the denialist position of carrying on as usual, ignoring the climate and ecological crisis – objectively there is little to choose between them. The reason is, as we showed in our report “In Place of Growth”, there is no evidence that the increase in greenhouse gas can be decoupled from economic growth at anything like the rate required. As Tim Jackson, in “Prosperity Without Growth” showed, the carbon intensity of the economy would have to decrease by 11 per cent per year, that’s sixteen times faster than it did between 1990 and 2009. Even some of the most prominent advocates of the Business as usual approach to climate change, the New Climate Economy Commission (although their discourse also draws on “Green Growth”) now admit thatAlthough GHG emissions are gradually being decoupled from growth rates, they are not doing so at anything like the rate required to put the world on [the politically agreed target of] a 2°C path”. Despite this, and in the face of contrary evidence, the Chair of the Commission, former President of Mexico, Felipe Calderón Hinojosai, makes the bold claim that “we can achieve economic growth and close the dangerous emissions gap”.

  1. Green Growth. This is based on the idea that we can grow the green parts of the economy and continue to enjoy the supposed benefits of economic growth. It supposes that there is good and bad growth, and that good growth can be selected. We can thereby have our cake and eat it.

    The Green Growth approach can be found in the work of the New Green Deal Group and their call for “Green Quantitative Easing”. This is an attractive idea, especially in response to the false logic (and its erroneous household budget metaphor) of austerity, in that it shows how interest-free money can be found for necessary investments (for example for energy conservation and renewable energy) that are needed as part of a strategy for reducing emissions while generating employment and further tax receipts. But without a cap on greenhouse gas emissions at source, it would fuel the growth of unselective consumption, precisely because of the multiplier effect on overall economic activity.

    The key problem here is that there is no guarantee that the expansion will be restricted to the ‘good’ parts of the economy. We illustrated this before like this:

“… in assessing whether the impact of an increase in one element of production is good or bad, we need to understand carefully what follows from it, and be prepared to look widely, expecting the unexpected.

An example might help.
It is decided that an area of good growth is efficient and affordable public transport, so that less fuel is used to get around and people spend less on doing so. As well as these two immediate benefits the change also has the wider social benefit of increasing social contact within neighbourhoods (people get talking at bus stops), reducing road casualties and reducing the rate of respiratory illness. But there are also negative consequences. The money people save by not running cars, or at least using them less, gets spent on other things – things like foreign holidays and plasma screen t.v.’s, eating more imported food. This increases carbon emissions, not here but in places like China, and on shipping and aviation.

Taking the whole system view has a further consequence for decision making. It is the total system impact that has to be considered. Our economy is too large, at least when considered in terms of its ecological impact. What selective growth there is has to be within the setting of absolute limits, which themselves have to progressively decrease until emissions are at a safe level.”

This idea that the economy is too big leads us on to the following two linked approaches, Steady State and Degrowth. But first, we should note that Manchester’s climate change plan, “Manchester, A Certain Future” (MACF) combines elements of both Business as Usual and Green Growth. Despite this, many of those involved in its governance and implementation are sympathetic to the premises of the following two approaches.

3) The Steady State Economy. This is associated primarily with the discipline of ecological economics, pioneered by Kenneth Boulding and Herman Daly in the USA and developed by other workers such as Tim Jackson in the UK and Peter Victor in Canada. Their key insight is that continued economic growth (strictly speaking, growth in composite measures of economic activity like Gross Domestic Product) comes up against the finite limits imposed by the earth’s systems: particularly finite resources (the inputs to the economy) and sinks (where the waste goes). Moreover, economic growth does not yield the benefits that are usually claimed for it. For example, increased GDP lost its association with increased sense of well-being here in the mid 1960s. The idea of a Steady State Economy, then is one that is designed and managed so it does not have to, and is not permitted to grow forever. As our name suggests, it is this approach that initially inspired us to try and work out what it would mean for Manchester and its region. But if we have a criticism it is that the writers associated with it tend not to emphasise that the implications of climate change almost certainly imply the need for a reduction in the scale of economic activity (as we know it) so tending to a steady state won’t give us rapid enough reduction of the emissions that continue to cumulate devastatingly.

4) Degrowth, which although sharing theoretical roots (in the application of thermodynamics to economics) with the Steady State approach, is influenced by European continental traditions of critical economic and social thought (principally the work of the post-Marxists, André Gorz and Cornelius Castoriadis). The name sounds like it advocates for a reduction in the scale of economic activity, and generally it does. However, the economist who coined the term (in French, decroissance), Serge Latouche, makes it clear that his interest is more in “changing the subject” away from the dominant role of growth in conversations about the economy and economics. Indeed, he goes further, to suggest that we need to escape from the domination of economic thinking, where other considerations are seen as less important, or are translated into economic and monetary terms.

The declaration from the first international degrowth conference, (Paris, 2008) defined

…degrowth as a voluntary transition towards a just, participatory, and ecologically sustainable society… The objectives of degrowth are to meet basic human needs and ensure a high quality of life, while reducing the ecological impact of the global economy to a sustainable level, equitably distributed between nations… Once right-sizing has been achieved through the process of degrowth, the aim should be to maintain a “steady state economy” with a relatively stable, mildly fluctuating level of consumption.” (Research and Degrowth, 2010, cited by O’Neill).

A more succinct definition is: “Living better, with less”.  It is this economic approach that we at Steady State Manchester are closest to, and which we draw on in our own work to map out what a Viable Economy might look like, in general, and for Manchester.

But how do we get there? Policy and Politics.

It is all very well to say that we need a transition to an economy of the right size, which will then be maintained in a steady state, but there are some serious challenges to doing that.

  1. How do stop degrowth causing unemployment, poverty,social dislocation and conflict? The difficulty is that degrowth has not been tried, although some countries (e.g. Japan) have got on quite well with an economy that is not growing. There is evidence from the ecological economists, Peter Victor and Tim Jackson, using macro-economic modeling, that it is possible, for an advanced national economy, to keep GDP stable, reduce greenhouse gas emissions and maintain full employment and fair income distribution. Although that is a persuasive demonstration, the challenge is still to bring it about politically. So the second challenge is,

  2. How do you achieve a degrowth society and economy, politically? For this it is necessary to wage a double struggle, against the neoliberal regime that reduces everything to a commodity (economic rationalism) where capital and markets substitute for democratic management of the economy and society, and against the illusions of Business as Usual and Green Growth. The Green Party of England and Wales has done some of this, but in waging the first struggle it has perhaps accommodated to much with Green Growthism. Moreover,some of their policies (e.g. nationalisation of the money supply and full reserve banking while based on an accurate diagnosis, are the wrong prescription for the realities of debt-based money). For a good example of how an anti-austerity campaign might be made consistent with degrowth, take a look at the recent Guardian article and 10 point plan in response to Spain’s Podemos party’s Keynesian economic programme, from Giorgos Kallis of the Barcelona Research and Degrowth Group.

For local activism, the enormity and complexity of climate change can seem like an impossibility in terms of action that could make a difference. Our approach has been to break things down into manageable chunks. So when working out what Steady State and Degrowth mean in an urban regional context, we have emphasised redistribution and equality, localisation of economic production, finance (money, debt,credit, investment) and alternative ways of assessing economic well-being. We work with actors inside and outside the “system” on all of these, while continuing to promote general understanding of the concepts and issues so an ecological approach to economics becomes part of a new everyday common sense. That in turn translates into specific campaigns. For example,

  • How much produce do the city’s supermarkets source from the region – what are they doing to increase this?

  • What investments are being made by the local government and other pension funds: have they considered the risk of unburnable hydrocarbons and investment in local renewables?

  • What are public and private organisations doing with spare land. Is any of it being made available for allotments? Have they thought about carbon sequestration and soil restoration?

  • What initiatives are going on to keep money circulating locally, rather than pouring out to fuel corporate profits and high carbon lifestyles? How can these be supported?.

  • Struggles for greater equality or against privatisation help prevent concentration of wealth which then funds high carbon lifestyles.

  • When local leaders uncritically justify things in terms of economic growth,how can this be challenged, to focus on the real impact of initiatives on people’s lives and the living planet?

  • Is green space being built on, and if so what spurious arguments (usually growth-based) are being used to justify it?

But the choice of local campaigning action will depend on a variety of factors, such as the scope for building alliances, the degree of local feeling about the issue, the likelihood of success, and there being a specific focus and demand to catalyse the campaign.

Mark H Burton

i Of whom I wrote in 2012: “I watched a dreadful speech by Felipe Calderón the fraudulently elected Mexican president which extolled the virtues of the free market, de-regulation, prvatisation, and the so-called free trade agreement with the US and Canada.  He didn’t mention the hunger in the Mexican countryside, the towns where there are just old people and children because the parents are working in sweat shops on the border, or illegally in the US – all a consequence of these policies.”

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