Sink or Swim? Given the political reality of climate change policy, what do we do now?
The environmental community at the international level and here in Washington DC is coming to terms with failure. It is well accepted that global action to address greenhouse gas emissions is largely being held up by inaction in the United States. And so, U.S. legislative failure has been functionally equivalent to global failure. You will be hard pressed to find someone with high hopes for an international deal in Cancun.
In contrast, the hopes of the environmental community following the 2008 election in the United States were high, albeit fairly detached from reality. Fundamentally, the electorate that brought George Bush to office twice did not undergo some kind of environmental awakening in 2008. The force that lifted Barack Obama was, in large part, the same force that would push climate policy off the agenda. The massive economic contraction, created by the unleashing of Minsky-type processes of financial instability, demanded a change…any change…in U.S. politics.
Although a careful look at history and markets would have told you years ago that an economic crisis was coming, once again as we have done throughout history, too many fell for the ponzi scheme of “this time is different” (see recent paper from authors Reinhart and Reinhart). Now we are faced with what will likely be up to a decade of economic malaise in the West. And in this new era of economic contraction and distrust (if not downright hostility) towards financial institutions, it is even less likely that the environmental community will be successful promoting the expansion of emissions trading.
The ironic thing is that the global economy is being held back by a lack of demand right now. And demand can come from just a few places: consumer spending, government spending, or corporate investments. Good luck getting consumers in the rich OECD countries to spend like they used to, even if it was a good idea. We need to get consumer debt under control. Government spending can be a good idea, but unfortunately Keynesian theory only works well if governments not only spend when times are bad, but also save when times are good. Times were good in the 1990s and 2000s, but few OECD countries did much saving. In the United States, for example, a federal budget surplus was wiped out with tax cuts and two wars. Had that money been put away for a rainy day, stimulus spending would now be eating away at a big surplus instead of running up an already large debt.
So the last option is corporate investment. But why should the corporate world invest in the absence of consumer demand? There is one reason: to mitigate GHG emissions, large investments will need to occur. And luckily, those investments will create jobs. All that is needed is policy to give the private sector a clear signal that their investments will not be stranded. Ironically, U.S. climate policy and a robust global climate change treaty could have been the ultimate global stimulus right when we needed it.
But now that we are where we are, what can we do while we wait for a shift in the debate? (A shift that seems like it can only come from an environmental kick in the pants delivered from a mother nature that is increasingly out of equilibrium.) As I have said in a previous blog post, there is a lot of social and technical infrastructure that we have just begun to build that will be needed to implement climate policy and effectively use the capital investments noted above. Specifically, we need a competent and professional implementation workforce that will ensure that climate policy is not just another ponzi scheme or investment bubble with little social return. This means we need schools and other institutions to get serious about preparing this future workforce. If just a few environmental campaigners and international institutions would dedicate a small portion of their efforts to these kinds of technical long-term investments, great progress could be achieved. It is the mission of the GHG Management Institute to bring about this change and we are looking for others out there with the vision to join us.
Following decades of campaigning, policy makers have probably just about reached a climate policy white paper saturation point. So as we awake to the reality of today’s climate policy hurdles, I would challenge the environmental community to stop feeling sorry for itself and make the most of the next couple of years by getting to work preparing a foundation for GHG mitigation.