More on Economics, Politics and the Mitigation of Climate Change

It’s that time of year. We switched our clocks back just as the weather turned cold and rainy, and afternoons became dark and dreary. We’ve had one or two sunny days over the past week, but I know winter is coming and I long for sunshine already. Most of my snow-bird neighbors have flown south and our towns have quieted down after the summer frenzy. My kayaks are put away for winter and the snowblower has new oil and a new sparkplug. I’ve stuck my neck out predicting a milder, less snowy winter than last year and I pray nightly to the el Niño god to please behave as anticipated. I’ve finished reading Naomi Klein’s This Changes Everything, and I’ve more or less absorbed the US mid-term election results. I am more worried than I was a month ago about the outcome of the climate negotiations that will be conducted through the following 12 months, but the news just received out of China is good.
The concept of the 1% — that group of people that owns nearly everything – has gained popularity with the success of Thomas Piketty’s book, Capital in the 21st Century. The increasing concentration of wealth now taking place across the world plays an important role in our negotiations over climate. The Economist has just published an updated graph contrasting the wealth of the bottom 90% of families and that held by the top 0.1% of families in the USA.

Percent of total wealth held by the bottom 90% and by the top 0.1% of families in the US for years from 1917 to 2012. Graph based on data from NBER Working Paper 20625, by E Saez and G Zucman, issued October 2014, and © The Economist (the graph is animated at the site, with captions detailing conditions at each of a number of times between 1917 and 2012).

This graph reveals that the situation in the USA is even more extreme than Piketty reported using his less extensive data. There has been a continuous increase in the proportion of wealth held by the top 0.1% of families since the mid-1980s, and a continuous decline in wealth held by the bottom 90% over that same time period. At present each group controls about 22% of total wealth, an amount, in the case of the 0.1% that is just shy of its peak proportional ownership in 1929. To put things in context, the top 0.1% in the US are 160,000 families each worth, on average, $73 million. That is a relatively small number of people used to having lots of power and influence. Other countries also have their 0.1% group.
Then there are the larger multinationals. If we strip out the 10 banks and investment funds among the top 20 public companies on Forbes’s 2014 list, you are left with 10 corporations with a total of about $3.6 trillion in assets, and a combined market value of about $2.5 trillion. Five of these are energy companies, two are automotive companies, and General Electric, Apple, and Walmart round out the list. With the possible exception of Apple and Walmart, these are companies that are strongly invested in the energy sector, as are the major banks and investment funds. Provision and delivery of energy is a major component of the global economy, and all of these super-sized multinational corporations are used to wielding considerable power and influence as they strive to maximize returns for their investors who, of course, include most of the 0.1%.

The concentration of wealth (and power), particularly in North America, has been continually increasing since the late 1940’s and now is at a historic peak level.

Next come the governments, large and small. I’m just a simple scientist, so I start with a belief that, in a democracy, governments are formed of representatives elected by the community to serve their collective needs. Members of government and the staff they appoint all work tirelessly and selflessly to secure the best possible outcomes for their community in terms of defense, education, health care, other social services, infrastructure, necessary structure of laws to facilitate the effective interactions of individuals and groups, and environmental protection to ensure environmental goods and services will remain available to future generations. At least, that is what I believe democratic governments should do. Unfortunately, governments are composed of people with individual capacities for knowledge, effectiveness, creativity, and integrity, who also wish to carve out careers for themselves, frequently by getting re-elected or by finding appropriate positions with people they meet or within organizations with which they interact. Government becomes a lot more like sausage-making than my idealized view suggests, and the concentration of power and influence from wealthy individuals and large corporations that swirls about any seat of government makes for a heady atmosphere helping many elected members and many staff develop a sense of entitlement over time, second only to that of the truly wealthy and powerful.
Finally, there is the nature of fossil fuel extraction and refining. This is a complex, capital-intensive set of industrial processes that require lengthy periods of time from initial discovery to production and sale – money invested is tied up for decades before yielding its profits. This phenomenon is not unique to the fossil fuel industry, but it is an impediment to changing priorities. People engaged in such activities are not able to change course overnight without suffering losses, so they have a natural tendency to want to continue to operate as they have been operating in the past.
Under these circumstances, it’s no surprise that wealthy individuals and large corporations tend to respond negatively to suggestions that their activities must be changed, and governments tend to look out for the needs or wishes of big business and the rich and famous, even if individual members try their best to remember they are there for the little guy too. As for the environment, well sometimes they remember environment is important too. But environment does not even vote, and I doubt that very many people elected to a government – local, regional or national – have read Garrett Hardin’s classic The Tragedy of the Commons, which was published in Science in 1968, and cited 24,815 times since.

Pollution of the Commons

Garrett Hardin’s thesis was quite simple. Whenever a community shares the use of a resource that does not belong to anyone in particular (such as the ‘commons’ of an English village that was available to any farmer to graze his cattle), rational self-interest will ensure that the resource will become over-used and damaged. Every individual benefits more by making more use of the resource, and even if every individual understands, and can see that the combined use is too intensive, there is no net individual benefit to holding back, refraining from making more use of it. Holding back, foregoing use, is a net cost, and somebody else will simply increase their own use of it.

Sheep grazing at Wool, Dorset. Photo © nationalgeographic.com

When an industry (or an individual household) releases unwanted wastes of any type into the environment, it is using the environment’s capacity to absorb that waste as a commons. Without any rules or regulations, all individuals or enterprises will use the environment this way because it is the most expedient way to dispose of wastes. Pollution is the result – an environmental problem caused because too many have assumed the environment will be able to absorb, break down and recycle their wastes for free. Humanity has used the environment’s capacity to absorb, break down and recycle wastes of all types from the very beginning, and all works well until the quantities of wastes exceed the capacity to the environment to handle them. These days, with our larger and larger, more and more intensive economies and denser and denser populations, we regularly encounter pollution problems. Our pollution of the atmosphere with greenhouse gases released through our changes in land use and our economic activities is simply the latest, and perhaps most difficult pollution problem we have caused.
To solve the tragedy of the commons, all the individuals and groups making use of the commons must agree to set up and then abide by rules governing the extent of use by each individual or group. There are several ways to do this, and the history of fisheries management has explored most of them (because open-access fisheries are one of the most obvious commons out there). When the issue is environmental pollution, the solution can be as simple as regulating the maximum rate at which pollutants can be released, or requiring a release method that results in good dispersal (so a larger piece of environment takes on the task of managing the waste). Solutions that introduce a way of reclaiming the pollutants, perhaps converting them into a useful by-product, are also beneficial. Sometimes, as in the case of CFCs, the only solution is simply not to release those particular pollutants into the environment at all. (Chlorofluorocarbons were widely used as refrigerants and household aerosol propellants, but they do not break down easily in the atmosphere, and are highly reactive molecules that acted to break down ozone, diminishing the thickness of the protective ozone layer in our atmosphere. They are no longer manufactured and are banned from use.)
Solving the tragedy of the commons requires cooperation among independent individuals or businesses. It is a problem requiring governance. It is also a problem whose solution invariably increases costs for all parties, and perhaps not equally. Now, imagine for a moment an ancient English village with a number of farmers of varying wealth (and sizes of herd). They are overgrazing the commons. What can they do about it? If this is a tranquil village, with a couple of nice pubs, and lots of church-going, friendly people they might reach a reasonable consensus on how to limit use. It might even be one that is fair to the less wealthy. It might even be one that once agreed to lasts some years before some crisis leads to overuse once more. If it’s a village in which people do not always see eye to eye, a place of strong passions spiced by a bit too much booze, they may well come to blows, and the less strong will likely lose. In both villages, those with wealth and influence likely always win – a good outcome is one where most other farmers also win. Even the simple process of agreeing on how best to use the commons to graze the cattle is a difficult one when there are large differences in relative wealth and power.

Discussions in some pubs are more cordial than in others. Music seems to help.

Causing climate change is not really much like grazing cattle on the commons. First, the climate commons includes the entire planet. Second, those who are overusing can be far away, out of sight and out of mind, perhaps somewhere far away like northern Alberta, central China, Western Australia, or south-central Texas. Or they might be the rest of us, in our big cities, using electricity that is delivered to us from power plants that are hidden away in remote valleys, off on the horizon, not thought about. Our emissions of greenhouse gases come primarily from the fossil fuel cycle (from discovery through extraction, refining and use), as well as from deforestation, other changes in land use, and manufacture of cement. The gases disperse in the atmosphere, better insulating the entire planet, and the time lags between emissions and impacts on our climate can be decades long. Reaching agreement on what to do to protect this commons is vastly more difficult than it was in that quaint olde English village.
The individuals most engaged in reaching that agreement include the very ones who have most to lose from any reduction in current emissions-generating activities – the large multinationals, the wealthy, and the leaders of government. The rest of us get to listen in, but rarely have seats at the negotiation table. Sometimes our votes replace one set of negotiators with another, but getting negotiators with differing perspectives seems increasingly rare.
The most obvious way to cut GHG emissions is to switch from use of fossil fuels to use of renewables. The present cost of electricity generated by solar, wind, hydro, tidal or geothermal energy is not materially different from the cost of electricity derived from burning coal, oil or gas. What stops a quick transition is the amount of capital invested in fossil fuel infrastructure and in proven but not yet extracted fossil fuel resources. This capital mostly belongs to the large multinationals and their wealthy investors, all of whom wield considerable influence over the politicians and political staff. Looked at this way, it’s not too surprising that while the IPCC is now 26 years old, and the UNFCCC will hold its 20th annual negotiating conference in Lima, Peru, commencing 1st December 2014, the world has made surprisingly modest progress towards agreement on limiting GHG emissions. The process rolls forward with one expensive conference after another, and with frequent slightly smaller conferences between the annual events. But every session is a sad spectacle of nations that consume fossil fuels, and nations that produce them, finding ways to delay, weaken, or simply strike out wording that might require them to cut back on their production or consumption. Most people who get to speak during the conferences say appropriate things about the urgent need to curtail GHG emissions, but in the rooms where the wording of proposed agreements is being finalized, those same people, or more usually the people who work for them, are busily ensuring that no significant positive steps will get taken. An agreement to reach an agreement next year on how to proceed in order to reach an agreement that will actually cut GHG emissions the following year, to come into effect several years later (this more or less summarizes what happened in Warsaw in November 2013) is not an agreement to do anything much at all, in my humble scientist’s opinion.

Canada has consistently underperformed on climate. Here we receive a lifetime achievement award from the Fossil of the Day program at COP 19, Warsaw, November 2013.

So, will we ever solve the problem of how to limit our GHG emissions? Naomi Klein argues that there has got to be a substantial grass roots uprising to demand that the powerful make the right choices. I cling to the belief that if people will only learn about what is happening, they will come to the realization that restricting emissions is the only logical way forward. But there is lots of evidence that individuals do not always act rationally, and that other individuals are engaged in a well-funded obstructionist campaign to muddy the evidence of climate change, making reaching rational decisions more difficult. And, something that approaches at the speed of a melting glacier does not exactly compete with the sex, drugs and rock n roll that bombard us from myriad screens every day. My faith in individuals’ ability to make decisions based on rational argument gets weaker by the day.

Good news out of China

The really good news this week emerged quite unexpectedly from China. On Wednesday 12th November, President Barack Obama and President Xi Jinping jointly announced from Beijing that their countries had reached agreement on a joint effort to reduce GHG emissions. According to the New York Times, Obama has committed the US to reduce emissions in 2025 by 26 to 28% of their level in 2005, a substantially increased commitment over the 17% by 2020 contained in the commitment made in Copenhagen in 2009. According to a New York Times op-ed by John Kerry published the same day (actually on Nov 11, because he was in the US, while Obama was on the other side of the date line in Beijing), the new pledge puts the US on a path to achieve an 80% reduction by 2050.

Presidents Barack Obama and Xi Jinping at announcement of their deal on climate.
Photo © Feng Li/Getty

For his part, Xi has committed China to stop the growth of its emissions by about 2030, and begin to rachet them down after that, and pledged to ensure that renewables and nuclear energy would together account for 20% of Chinese energy production by 2030. To meet its goal, China will need to deploy an additional 800 to 1,000 gigawatts of nuclear, wind, solar and other renewable generation capacity by 2030 – an enormous amount, about the same as all the coal-fired power plants in China today, and nearly as much as the total electricity generation capacity of the United States. This fact alone should put the lie to the statement by Senator McConnell that “it requires the Chinese to do nothing at all for 16 years, while these carbon emission regulations are creating havoc in my state and other states across the country.” Yes, his home state of Kentucky mines coal. Who’d have guessed he’d not be enthusiastic. There were other important agreements finalized during Obama’s visit to Beijing, but I think, with time, the climate accord may be the biggest by far.

Aftermath of the US election

The climate deal announced with China comes days after the mid-term elections in the US gave the Republicans a sweeping victory and ensured that Obama would have to deal with a difficult Congress for the final two years of his presidency. I could wade into the low turnout by left-of-center voters, the corrupting influence of big money, the obscene amount of money spent (does any other country approach this level of excess?), and the idiotic platforms of many who won. But I won’t. From the perspective of the environmental crisis, the only thing that matters is what this shift will do to momentum towards a significant climate treaty in 2015.

McConnell is already saying he is ‘disappointed’ in how Obama is acting since the election – any chance of bipartisan behavior from this man? Photo from Washington Post video

My initial assessment was that this election was pure bad news for the environment. And press reports supported that pessimism. The moment the results became clear, there were comments being made about the need to secure early approval of the Keystone XL pipeline. I did not think it was actually up to Congress to do this (and still don’t), but the speed at which the calls for quick approval appeared made it clear that a pro-fossil fuels, anti-environment agenda was being promoted. Without rehashing the details yet again, let me just say that delaying the Keystone XL remains as useful as it ever was. Delaying approval of pipelines keeps the paths for export of tar sands product congested and slow. This slows production and exploration. That keeps tar sands product in the ground where it belongs.
The election results ensure that Obama will only be able to move on things that he can do without Congressional approval. Senator McConnell, likely to be the new Senate Majority Leader, comes from coal-producing Kentucky. Senator James Inhofe of Oklahoma, likely to become Chair of Environment and Public Works, believes that climate change is “the greatest hoax ever perpetrated on the American people”, and the IPCC a front for a global political left, and there are scores of other Republican senators and representatives who will put fossil fuel interests well ahead of environment.

Canada and Australia, the Bobbsey Twins of Fossil Fuels

At present, the low prices for oil are a second brake on Canadian tar sands development. But tar sands development needs many brakes because there is not yet any sign that either the Harper government or Alberta’s Prentice government have lost their enthusiasm for dirty oil. Harper is now in a difficult place with an intolerable record on climate, an election in the offing, and his arguments for not acting falling by the wayside. He can no longer claim to be waiting for the US to move – Obama has ensured that the US performance on curtailing emissions is far stronger than Canada’s, even without the new agreement with China. Nor can he claim to be waiting for other major emitters to move. China has been making major investments in alternative energy sources, chiefly solar, and the agreement with the US shows a real willingness to make substantive changes. On top of all this, the oil pricing downturn has cut into governmental revenues just when he needed a nice surplus to spend in frivolous pre-election gifts to the public. It will be interesting to see what Harper does now (the 6 Billion surplus for 2015 predicted in the last budget has now shrunk to 1.9 Billion).

Harper to Obama “you don’t need to tell them the truth so long as you use your hands to signal how big the lies are – that’s what I instruct all my cabinet to do” Photo taken 2013 by Adrian Wyld/CP

Just so there is no doubt where Alberta stands, Premier Jim Prentice gave an interview on 9th November assuring all that Alberta remains firmly in the fossil camp. He actually said “Certainly we all want to improve environmental outcomes and want to find cleaner sources of energy, but there hasn’t really been the game changing technology developed yet that would allow us, as consumers, to not be using hydrocarbons in a way similar to what we do currently”. This suggests he is not reading of the advances in the alternative energy sector that have now achieved, or come close to achieving what is called ‘grid parity’ – equivalent cost per unit of energy regardless of the source. Indeed, if the various hidden subsidies that support the oil and gas industry were to be removed, the use of renewables instead would be a simple checkbook decision because the renewables would not be more expensive.

Jim Prentice showing he knows the patented Harper gesture to show the size of your lies.

Prentice followed his ‘lack of technology’ claim with the bizarre statement that the vast majority of emissions come from consumers not producers! “It’s when we climb in our cars or get on an airplane, or turn on the flat screen television in our house. I mean that’s really the point where the lion’s share of the emissions comes from”. Apparently the Alberta premier does not understand that the emissions released from extracting, shipping, refining, shipping again, and ultimately burning a barrel of oil all come because it is oil. And then he finished his interview with the pious claim that he wants to bridge the difference between pipeline proponents and those opposed to them by making sure the pipelines are constructed to the highest environmental standards. High environmental standards? Alberta? It’s not quite as over-the-top as some statements by US politicians who still claim climate change is a hoax, but it still shows withering ignorance, or crass distortion, by a political leader.
Unrelated entirely, I note that this week it was reported that Saskatchewan’s new Environmental Code lacks a section on climate change! A chapter had been developed during the two years it took to write the code, but it was dropped because Saskatchewan was waiting for guidance from the Harper government. Guidance on climate policy? From Harper? I’m particularly disappointed having lauded SaskPower recently for opening the world’s first coal-fired power plant with carbon capture and sequestration. And just for completeness, I should add that CBC News, in reporting on how the US – China agreement would put Canada in a difficult place, added “Environment Minister Leona Aglukkaq was not available for interviews on Wednesday”. Maybe she is finally learning how embarrassing her long record of nonsense statements on environment has become.
I include Australia here because I find it fascinating how much like Canada Australia has become since Tony Abbott came to power. Yes, they mine coal, gas, and a little bit of offshore oil, while we mine tar sands, other oil and gas, but Australia and Canada have similar ‘resource-extraction and export’ economies, and with Abbott, similar political philosophies. Australia was making significantly better progress on climate prior to their election, and had a carbon tax in place. That tax is now gone and the ‘drill, baby, drill’, or better, ‘dig, baby, dig’ chant is heard loudly across the land.

Australia’s Prime Minister Tony Abbott Photo © Dan Peled/AAP

PM Abbott gave an interview to the Guardian on 4th November that was all about the virtues of coal. He became quite lyrical, saying “For the foreseeable future coal is the foundation of our prosperity. Coal is the foundation of the way we live because you can’t have a modern lifestyle without energy.”
Then he added “You can’t have a modern economy without energy and for now and for the foreseeable future, the foundation of Australia’s energy needs will be coal. The foundation of the world’s energy needs will be coal.” A little repetitive, but his words have a certain flow to them. Here is another quote: ““Coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future, here in Australia, and right around the world.” Little doubt where Abbott stands on fossil fuels. He even claimed that use of coal is good for developing countries. He should have a conversation with his Chinese neighbors, preferably outdoors, on a smoggy day in Beijing.
In my view, both Abbott and Harper and their allies have become trapped by the fossil fuel multinationals, convinced that rapid exploiting of their reserves would bring jobs, and tax revenues making their countries wealthy, and ensuring they got re-elected many times. The minor issues of environmental damage and climate change? Well, those are problems, but not for a little while yet, so if we ignore them, if we brand all who oppose us as radical, leftist luddites, and tell our people that we are looking after jobs and the economy all will be well. And so it has been. But will this delusional journey continue much longer? When the value finally goes out of fossil fuels, it will vanish suddenly. In an interesting Huffington blog post, Woodrow Clark quoted Sheikh Ahmed-Zaki Yamani, who said in 2000, “The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.” We all live in interesting times, and the news out of China this week was a sign of just how interesting these times may be becoming.