Monthly Archives: June 2012

Is a carbon-neutral life extremely cheap?

Recently my wife suggested that we offset all our emissions. Even though I found this a noble idea, I was worried that we might lose a fortune by doing so. This worry is unfounded (at least for a Swiss): Offsetting my yearly emissions costs around $300, possibly even less.

Here is an observation about this number: If everybody were to live a carbon-neutral life, then offsetting emissions would be much more expensive. In that case, it would cost me (to make an arbitrary guess) $10’000 rather than $300 to “compensate my life”. If everybody else were to offset their emissions, I couldn’t just pick the low-hanging fruit of cheap mitigation measures but would have to make use of very costly emission reduction measures. So, which number is the right one? Can I claim to actually have offset my emissions if I only pay $300? In some sense, the answer is “yes”. There is nothing incorrect about the following assertion: The atmospheric concentration of CO2 is the same if I emit and pay $300 to an offsetting company as it were if I weren’t around on this planet at all. Thus, my payment of $300 actually does offset my emissions. (Admittedly, many people don’t believe that offsetting works in practice; let’s set these worries and the uncertainties aside for the moment).

However, many are interested in compensating their emissions for a certain specific reason: they want to do their fair share in humanity’s common task of protecting the climate. If that is the reason for their interest in compensation, then things look different. If you are keen on doing your fair share and if you believe that the fair share consists in bearing your part of the overall costs that would arise if everybody were to do the right thing (and if you believe the right thing presently consists in living a carbon-neutral life), then your fair share would consist in paying $10’000 rather than $300. Another way to see this goes as follows: In order to do your fair share, you have to pay two bills. First, you pay $300 to actually offset your own current emissions. Second, you pay $9’700 on account of making mitigation measures more expensive for others in the future. Mitigation measures are more expensive for them because you have already exhausted the low-hanging fruit – your mitigation imposes an externality on them, so to speak.

An objection to this line of reasoning might arise: It is unrealistic that everybody else will offset their emissions. So, yes, if you want “to do your part” you have to pay the first bill of $300. But the second bill must be calculated differently: You have to estimate how much more expensive future mitigation will be on a realistic assumption about how much more future mitigation there will be (rather than on the assumption that everybody will fully do their fair share of mitigation in the future). In that case, the true price I would want to pay for compensating my yearly emissions would be something in between $300 and $10’000.

These thoughts are all rough. The basic message is this. Going carbon-neutral might seem extremely cheap. However, in order to know whether the moral goal you want to achieve by going carbon-neutral is really as cheap as it seems, you need to go into difficult philosophical territory. You cannot know how much it costs you without carefully examining the moral reason you have for going carbon-neutral in circumstances where others don’t go carbon-neutral. The literature on duties under partial compliance is the place to look for answers (and, when it comes to calculating actual numbers, the economic literature on the shape of Marginal Abatement Costs curves is relevant as well).


An overlooked rationale for the Polluter Pays Principle

When I want to lose weight, I am often relieved to run out of chocolate in my apartment. Often the relief occurs because I know that I couldn’t resist the temptation. But, interestingly, I might be happy to run out of chocolate even if I were able to resist the temptation. Why is this so? Trivially, it’s much easier to refrain from eating chocolate when there is no chocolate around. If I simply don’t have the possibility of grabbing another bite then I am spared from constantly having to fight the urge to do so. If, in contrast, the chocolate were there right in front of me, I would use up lots of mental effort for refraining from it. I could save this mental energy by simply not having the opportunity of eating chocolate in the first place. (The internet even offers self-binding websites where people are actually willing to lose money in order to make it easier for them to reach their goals and overcome their temptations.)

Where is the link between the chocolate and the Polluter Pays Principle? Note first, that there are many different  rationales for the Polluter Pays Principle. There is…

  • …a consequentialist rationale: having to pay for pollution gives people an incentive to pollute less
  • …a corrective rationale: making polluters pay is fair because their payment can be seen as compensation for the harm they cause through their pollution
  • …a distributive rationale: the polluters typically benefit from polluting and making them hand over part of their benefits to those who are harmed by pollution yields a more equal distribution than if they could keep their gains.

I want to suggest that there is a further rationale for the Polluter Pays Principle, namely…

  • …a second consequentialist rationale: making people pay for pollution reduces the mental effort they need for refraining from pollution.

The idea is the same as with the chocolate. Assume that you are the type of person who voluntarily foregoes air travel. This sacrifice is based on your personal conviction that the heavy pollution involved in flying makes air travel immoral. You are the type of person who does not need to be incentivized by a Polluter Pays Principle in order to forego flying. Your intrinsic motivation is sufficient. The crucial point now is this: You might still be glad if your government were to tax air travel. This would make it easier for you to forego flying. Rather than having your conscience do heavy-duty work in suppressing daydreams about holidays on the Maldives, you can simply tell yourself that the taxation on the flight would make the flight too expensive for you anyway. Instead of having to rely on the burdening mental effort of intrinsically motivating yourself, the Polluter Pays Principle allows you to take the motivationally easier route of foregoing flights on the basis of your financial self-interest.

In other words: By setting up a Polluter Pays Principle, the government provides a service to environmentally conscious citizens. The government saves them the mental energy of having to exert willpower in order to perform voluntary green actions out of pure moral conviction. This rationale for the Polluter Pays Principle is genuinely different from the other rationales.

Evidence for/against future generations being better off than we are

Will our descendants be better off than we are? Cornucopians say: Yes, most likely. Cornucopians exhort society and in particular environmentalists to forego their pessimistic fears about the future. Cornucopians would of course not view their own stance as an instance of replacing pessimism by optimism but rather as an instance of realism: They consider the prediction that future generations are much better off than we are the most sober and plausible estimate.

It matters tremendously whether cornucopians are right or not. If our descendants can actually be expected to be significantly better off than we are, then there is a strong case for diverting resources from climate mitigation – and other investments into the future – into projects with a focus on the present such as poverty relief.

My big problem is: I find it extremely hard to make an empirical case for or against cornucopians. Both sides of the debate seem to rest their case mostly on gut feeling (and distortions by self-interest, by a human propensity to apocalyptical thinking, etc. do their fair share in influencing that gut feeling). If one wanted to have a reasoned debate based on empirical grounds — where would one start? If one had to make a bet about the level of welfare in 200 years, how would one rationally go about in placing one’s money? What evidence could we cite to refute or support the cornucopian predictions?

One place to start would be to look long-term economic models (they usually predict strong growth over the next century). However, these models seem to presuppose a cornucopian growth idea rather than to arrive at it. Another strategy for replacing gut feeling with argument would be to extrapolate past growth rates (One would then have to make a case why one chooses to extrapolate the last, say, 50 years rather than, say, the last 5000 years). A third approach would start from the extrapolation, too, but enrich it with innumerable bottom-up considerations about relevant factors that affect the growth or de-growth trend. The most prominent such relevant factors would be looming environmental catastrophes, assumptions about human ingenuity, guesstimates on political stability, population growth, etc.

Any help would be appreciated. My basic question is: What methods are there for going beyond a basic faith or gut feeling for the purpose of adjucating cornucopian “predictions”? What types of empirical evidence can be given to make a real case for or against the cornucopian idea?

The Valuation of Ecosystem Services in an Intergenerational Perspective

Intergenerational ethicists dealing with environmental problems usually start by asking what moral obligations (for instance, in terms of biodiversity conservation) we have towards future generations. It is assumed that these obligations must have a moral foundation that is context-independent and that environment is one of the possible contexts of application. This approach is intuitively appealing, but it may lead to underestimating the role of contextual variables on individual motivation to act for the environment. Here I approach the problem from a different angle and ask what consequences for intergenerational ethics can be drawn from studying the current instruments used in valuing environmental services.

In the last three or four decades, the socio-economic, moral and policy issues connected with environmental problems have been increasingly visible in academic research, but also in public debates. Apart from the usual (largely neoclassical) treatment of environmental valuation through market prices or contingent methods (‘willingness to pay’ and ‘willingness to accept’), new approaches have been developed.

They focus on a more nuanced understanding of what valuation means, as well as a broader range of valuation methods that question the mainstream reliance on economic assessment as a reliable guide to policy-making. Insofar as they emphasize the strong coupling of ecological and socio-economic systems and the need to integrate ecologic sustainability concerns in sectorial policies, they usually go under the label of ecological economics.

In general, these valuations have referred not to nature or environment as such (whose total value is indefinitely high), but to specific services we derive from them. The Millennium Ecosystem Assessment (2005) has grouped these services under four categories: provisioning (food, timber etc.), regulating (e.g. pollination, flood control), ‘cultural’ (recreation, cultural identity) and supporting (necessary for the functioning of all other services, e.g. soil formation, carbon fixation). The problem is then how to convert the perceived benefits that we get from these services into quantifiable expressions of value. The concept of Total Economic Value (TEV) captures the attractive idea that marginal changes in ecosystem conditions can be translated into a gain or loss of benefits, which are converted into expressions of value using a common metric, usually monetary. We could then compute the total net value (benefits minus costs) and therefore build a consistent utility function which optimizes the allocation of goods by equating the marginal rate of substitution between pairs of goods to the price ratio.

However, all this implies several (problematic) assumptions – for instance, that market prices take into account all relevant information to be included in the environmental valuation. (In particular, the so-called ‘non-use values’ – e.g. the intrinsic value one places on the very existence of some environmental resource, beyond any possible use – are difficult to integrate in TEV-based calculations.) It also ignores post-Keynesian criticisms of neoclassical reliance on equilibrium markets. Current valuation methods are fraught with other problems too: (1) they tend to reflect current preferences and state of knowledge, (2) they are context-dependent and therefore vary spatially and temporally and (3) they are unable to accommodate multi-criteria assessment methods. Nevertheless, although they may disagree on the appropriate methods to be applied, many authors consider environmental valuation a practical necessity: “although ecosystem valuation is certainly difficult and fraught with uncertainties, one choice we do not have is whether or not to do it. The decisions we make as a society about ecosystems imply valuations (although not necessarily expressed in monetary terms)”. (Robert Costanza et al., Nature, 1997, p. 255).

What does this all mean in an intergenerational perspective? First of all, it shows that intergenerational issues are part of a larger methodological debate that touches the core assumptions of mainstream economics. Behavioral research is challenging the traditional model of the ‘rational’ utility-optimizing actor, by pointing out to cognitive limits in acquiring and processing information, cognitive biases (loss aversion, endowment effect, confirmation bias etc.), stereotyping and intertemporal discounting. In particular, data shows that intertemporal choice manifests hyperbolic discounting (i.e. the discount rate for the near future is higher than the one for long term prospects, which can lead to time-inconsistency of choices). The aggregate effects or imperfectly rational agents, which can often lead to dysfunctional market behavior and suboptimal outcomes, have also been studied (for instance, in the context of groupthink or instances of collective euphoria or phobia).

Secondly, by analyzing the specific contribution of different ecosystem services to human welfare and the way this welfare can be sustained over time, it is sometimes possible to derive intergenerational rights and obligations from a broadly-construed ‘environmental duty’, rather than deriving environmental obligations from an intergenerational ethics. Combining the two approaches is practically useful: while some people are motivated mainly by an anthropocentric ethics focused on duties of people, groups and generations towards one another, others will react more vividly to issues such as connectedness to nature and biodiversity protection. (After all, bioethics is one of the fastest developing fields in ethical theory.)

Thirdly, TEV-based methods are obviously not well fitted to address intergenerational concerns, since they generally take the preferences of current generations (as expressed through different valuation methods) as the only possible justification for any obligations towards future generations. As already mentioned, intertemporal discounting and context-dependency can render aggregate preferences inconsistent and thus undermine collective action and policy-making. While monetary valuation is clearly useful in enabling trade-offs between services (including ecosystem services), we should not expect all and everything from it. Multi-criteria assessment and other deliberative methods allow the integration of multiple non-convergent values and preferences. They may provide an essential ingredient for facilitating public participation, in order to protect essential non-market ecosystem services.

No problem with taking the helicopter since we have “perfectly simple” solutions for climate change?

Here’s a short and bold comment by climate scientist Myles Allen. It will definitely give you some food for thought. If only all climate scientist could write in such an exciting way!

Photograph: twitter@iamwill

I attended a talk by Myles Allen last month and after the talk a PhD student went up to him and said “I want to tell you where you’re wrong.” Trying to emulate this self-confidence, I’ll list two points where I think Allen’s comment doesn’t hit the mark:

  1. Taking the helicopter from London to Oxford is a problem. To see why, assume for the sake of the argument that we only have two strategies available to solve the climate problem: First, a political solution that relies on technology and market instruments. Second, a conversion of the hearts and minds of individuals to motivate themselves for a greener lifestyle. Here’s my point: Even if you strongly believe in the first strategy, you still cannot fully do without the second.
    The climate problem requires such large scale changes that we will not be able to do without at least some shift in our mindsets. For example, how will we get people to vote for Allen’s preferred solution (carbon sequestration) if there has not been at least some shift in our mindset in a green direction? After all, mandating carbon sequestration will be very expensive and if these economic costs are to be politically feasible, people need a sense of urgency about the climate problem. That sense of urgency goes hand-in-hand with at least some greenwards change in our minds and lifestyles. Poking fun at “heroical” individual behavioral changes is not helpful to support that change.
  2. Allen makes the following point: If (or even Europe as a whole) reduced its carbon consumption then that same carbon would simply be pumped into the atmosphere later on. But why should we think so?
    Allen himself considers it possible that humanity will in some way or other manage to politically enforce a solution that relies on putting carbon back in the ground. But if that solution should be politically feasible, why shouldn’t it also be politically feasible to keep the carbon in the ground in the first place? Believing the one to be politically feasible but not the other requires a justification.