Tag: green policies

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Global boiling – why not take urgent action now?

The global average temperature for July 2023 was the highest ever recorded and July 3rd was the world’s hottest day on record. We’ve seen scenes of wildfires raging across much of southern Europe, people suffering searing temperatures in south-west USA, southern India and western China, flash floods in South Korea, Japan and eastern USA. These are all directly related to global warming, which is causing weather systems to become more extreme. And as the planet continues to warm, so these problems will intensify.

The Secretary General of the United Nations, Antonio Guterres, in a press conference on 27 July warned that:

Climate change is here. It is terrifying. And it is just the beginning. The era of global warming has ended; the era of global boiling has arrived. The air is unbreathable. The heat is unbearable. And the level of fossil-fuel profits and climate inaction is unacceptable. Leaders must lead. No more hesitancy. No more excuses. No more waiting for others to move first. There is simply no more time for that.

The environmental, human, social and economic impact of global warming is huge, but concentrated on just part of the world’s population. For many, a more variable climate is at worst an inconvenience – at least in the short term. But it is the short term that politicians are most concerned about when seeking to win the next election.

Tackling climate change requires action to reduce carbon emissions now, even though the effects take many years. But one person’s emissions make only a minuscule contribution to global warming. So why not be selfish and carry on driving, flying off on holiday, using a gas boiler and eating large amounts of red meat? This is what many people want to do and governments know it. Many people do not like green policies as they involve sacrifice. Examples include higher fuel prices and restrictions on what you can do. So, despite the visions of fires, floods and destruction, governments are wary about raising fuel taxes, airport duties and charges to use old high-emission cars in cities; wary about raising taxes generally to provide subsidies for sustainable power generation; wary about banning new oil and gas fields that would reduce reliance on imported fuel.

Because the external costs of carbon emissions are so high and global, government action is required to change behaviour. Education can help and scenes of devastation from around the world may change the hearts and minds or some people. Also, the prospect of profits from cleaner and more fuel-efficient technology can help to spur innovation and investment. But to meet net zero targets still requires policies that are unpopular with many people who might be inconvenienced or have to pay higher petrol, energy and food prices, especially at a time when budgets are being squeezed by inflation.

Part of the problem is a distributional one. The people most affected by the cost-of-living crisis and higher interest rates are those on lower incomes and with higher debts. Politicians know that it will be hard to win the votes of such people if they are faced with higher green taxes. As elections approach, politicians are likely to backtrack on many environmental commitments to appeal to such people.

This is beginning to happen in the UK, with the government declaring that it is on the side of the motorist. Indeed, Rishi Sunak has just announced that the government will authorise more than 100 new licenses for new oil and gas wells in the North Sea. This is despite the United Nations, various other international bodies, climate scientists and charities calling for a halt to all licensing and funding of new oil and gas development from new and existing fields. The government argues that increased North Sea production would reduce the reliance on imported oil.

Video

Articles

Questions

  1. In what sense is the environment a ‘public good’? How is the concept of externalities relevant in analysing the private decisions made about the use of a public good?
  2. How may game theory be used to help understand the difficulties in reaching international agreement about climate change policies?
  3. What is meant by ‘net zero’? Is carbon capture and storage an acceptable alternative to cutting carbon emissions?
  4. In what ways could policies to tackle climate change be designed to reduce income inequality rather than increase it?
  5. What are the arguments for and against banning (a) petrol and diesel cars; (b) gas boilers; (c) fossil-fuel power stations? How much notice should be given if such bans are to be introduced?
  6. What is meant by ‘nudge theory’? In what ways could people be nudged into making greener decisions?
  7. What are the arguments for and against granting new licences for North Sea oil and gas drilling? Explain where you feel the balance of the arguments lies.
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Code Red for humanity

The UN’s Intergovernmental Panel on Climate Change (IPCC) has just published the first part of its latest seven-yearly Assessment Report (AR6) on global warming and its consequences (see video summary). The report was prepared by 234 scientists from 66 countries and endorsed by 195 governments. Its forecasts are stark. World temperatures, already 1.1C above pre-industrial levels, will continue to rise. This will bring further rises in sea levels and more extreme weather conditions with more droughts, floods, wildfires, hurricanes and glacial melting.

The IPCC looked at a number of scenarios with different levels of greenhouse gas emissions. Even in the most optimistic scenarios, where significant steps are taken to cut emissions, global warming is set to reach 1.5C by 2040. If few or no cuts are made, global warming is predicted to reach 4.4C by 2080, the effects of which would be catastrophic.

The articles below go into considerable detail on the different scenarios and their consequences. Here we focus on the economic causes of the crisis and the policies that need to be pursued.

Global success in reducing emissions, although partly dependent on technological developments and their impact on costs, will depend largely on the will of individuals, firms and governments to take action. These actions will be influenced by incentives, economic, social and political.

Economic causes of the climate emergency

The allocation of resources across the world is through a mixture of the market and government intervention, with the mix varying from country to country. But both market and government allocation suffer from a failure to meet social and environmental objectives – and such objectives change over time with the preferences of citizens and with the development of scientific knowledge.

The market fails to achieve a socially efficient use of the environment because large parts of the environment are a common resource (such as the air and the oceans), because production or consumption often generates environmental externalities, because of ignorance of the environmental effects of our actions, and because of a lack of concern for future generations.

Governments fail because of the dominance of short-term objectives, such as winning the next election or appeasing a population which itself has short-term objectives related to the volume of current consumption. Governments are often reluctant to ask people to make sacrifices today for the future – a future when there will be a different government. What is more, government action on the environment which involves sacrifices from their own population, often primarily benefit people in other countries and/or future generations. This makes it harder for governments to get popular backing for such policies.

Economic systems are sub-optimal when there are perverse incentives, such as advertising persuading people to consume more despite its effects on the environment, or subsidies for industries producing negative environmental externalities. But if people can see the effects of global warming affecting their lives today, though fires, floods, droughts, hurricanes, rising sea levels, etc., they are more likely to be willing to take action today or for their governments to do so, even if it involves various sacrifices. Scientists, teachers, journalists and politicians can help to drive changes in public opinion through education and appealing to people’s concern for others and for future generations, including their own descendants.

Policy implications of the IPCC report

At the COP26 meeting in Glasgow in November, countries will gather to make commitments to tackle climate change. The IPCC report is clear: although we are on course for a 1.5C rise in global temperatures by 2040, it is not too late to take action to prevent rises going much higher: to avoid the attendant damage to the planet and changes to weather systems, and the accompanying costs to lives and livelihoods. Carbon neutrality must be reached as soon as possible and this requires strong action now. It is not enough for government to set dates for achieving carbon neutrality, they must adopt policies that immediately begin reducing emissions.

The articles look at various policies that governments can adopt. They also look at actions that can be taken by people and businesses, actions that can be stimulated by government incentives and by social pressures. Examples include:

  • A rapid phasing out of fossil fuel power stations. This may require legislation and/or the use of taxes on fossil fuel generation and subsidies for green energy.
  • A rapid move to green transport, with investment in charging infrastructure for electric cars, subsidies for electric cars, a ban on new petrol and diesel vehicles in the near future, investment in hydrogen fuel cell technology for lorries and hydrogen production and infrastructure, cycle lanes and various incentives to cycle.
  • A rapid shift away from gas for cooking and heating homes and workplaces and a move to ground source heating, solar panels and efficient electric heating combined with battery storage using electricity during the night. These again may require a mix of investment, legislation, taxes and subsidies.
  • Improvements in energy efficiency, with better insulation of homes and workplaces.
  • Education, public information and discussion in the media and with friends on ways in which people can reduce their carbon emissions. Things we can do include walking and cycling more, getting an electric car and reducing flying, eating less meat and dairy, reducing food waste, stopping using peat as compost, reducing heating in the home and putting on more clothes, installing better insulation and draught proofing, buying more second-hand products, repairing products where possible rather than replacing them, and so on.
  • Governments requiring businesses to conduct and publish green audits and providing a range of incentives and regulations for businesses to reduce carbon emissions.

It is easy for governments to produce plans and to make long-term commitments that will fall on future governments to deliver. What is important is that radical measures are taken now. The problem is that governments are likely to face resistance from their supporters and from members of the public and various business who resist facing higher costs now. It is thus important that the pressures on governments to make radical and speedy reductions in emissions are greater than the pressures to do little or nothing and that governments are held to account for their actions and that their actions match their rhetoric.

Articles

Report

Questions

  1. Summarise the effects of different levels of global warming as predicted by the IPCC report.
  2. To what extent is global warming an example of the ‘tragedy of the commons’?
  3. How could prices be affected by government policy so as to provide an incentive to reduce carbon emissions?
  4. What incentives could be put in place to encourage people to cut their own individual carbon footprint?
  5. To what extent is game theory relevant to understanding the difficulties of achieving international action on reducing carbon emissions?
  6. Identify four different measures that a government could adopt to reduce carbon emissions and assess the likely effectiveness of these measures.
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Green policies and government – still on amber?

The widening of the M6 will cost £3bn or £1000 an inch. What does this fact tell us about the government’s green priorities? Are we really leading the world on climate change as the government likes to claim? In the article below Ashley Seager (Economics Correspondent for the Guardian) looks at these issues and argues that we may be the poor man of Europe when it comes to ‘green’ policies.

Green means slow to this government Guardian (6/8/07)

Questions

1. Explain what Ashley Seager means by the sentence “What the government has also not done is send out new “price signals”, as economists call them” (paragraph 7).
2. Explain what is meant by a feed-in tariff (FIT). Why does Ashley Seager argue that this is a vital policy tool in the fight against climate change?
3. Discuss two policies that the government could adopt to help raise the proportion of renewable energy generated in the UK.