Tag: economics

Collecting silences

Posted on by janet.crompton

‘Noise’ is the Greenhouse gas (GHG) emissions which have resulted from fossil-fuel-powered economic growth which is measured as GDP for particular territories. In Figure 1, ‘noise’ is the area below the green line to the left of the vertical dotted line (historical) and below the blue line to the right of the vertical dotted line (projected). ‘Silence’ is the reduction of fossil-fuel use and the mitigation of carbon emissions. In Figure 1, ‘silence’ is the green shaded area above the blue line and below the dotted blue line to the right of the vertical dotted line.

Figure 1

To ensure that we maintain atmospheric GHG emission concentrations conducive to human habitation and the ecosystems that support us, we need to assign less value to ‘noise’ (burning fossil fuels) and more value to ‘silence’ (GHG emission mitigations). Creating a system which assigns value to ‘silences’ by turning them into investable resources requires an effort sharing mechanism to establish demand and organizational capacity alongside accurate measuring, reporting and verification for supply.

Organizational capacity for supplying ‘silences’ depends on the ability of organizations to create, trade and accumulate GHG emission mitigations. Due to the intangible nature of such ‘silences’, turning GHG emissions mitigations into investable sources requires their assetization as quasi-private goods with well-defined and delineated quasi-property rights. As preservations of the intangible commodity of stable atmospheric GHG concentrations through the reduction of pollution, such rights need to protect investment by ensuring that these private goods are definable, identifiable and capable of assumption by third parties. Such rights also require enforcement and protection against political and regulatory risk.

Commodifying GHG emission mitigations as quasi-private goods by assetizing them with well-defined and delineated quasi-property rights therefore provides the basis for the supply of ‘silences’. Rather than ‘internalising’ the cost of stabilising or reducing atmospheric GHG concentrations, this approach assigns value to GHG emission mitigations. Yet, if we want to avoid climate catastrophe according to the most recent IPCC 1.5C report and the UNDP Emissions Gap Report, GHG emission mitigations also require concretization on the demand-side. There are several examples of GHG emission mitigation and energy demand reduction assetization that can help illustrate how such systems of demand and supply can function.

Similar to GHG emission mitigations, energy demand reductions also represent the reduction of an intangible commodity vis-à-vis a baseline. While stable atmospheric GHG emission levels are the intangible commodity in the case of the former, in the case of the latter the intangible commodity is energy supply which fuels economic growth. Both require the assetization of mitgations/reduction to create ‘tangibility’, which provides the basis for assigning value. To illustrate, energy demand reductions are absent on domestic and corporate accounts and subsequently undervalued vis-à-vis increases in revenues.

Market-based instruments that succeed in setting and enforcing targets and creating systems of demand, however, can create ‘tangibility’. Energy demand reductions, for example, are assetized as white certificates representing equal units of energy savings (negawatts) in white certificate markets. Similarly, demand-side response enables the assetization of short-term shifts in energy (non-)use (flexiwatts) to benefit from flexibility and balancing markets. Carbon emission mitigations are assetized under the Clean Development Mechanism (CDM) as Certified Emissions Reductions (CERs).

Crucially, these examples shift the emphasis from the cost of pollution and the need to ‘internalise’ this cost or from turning pollution into a quasi-private good through Emissions Trading Schemes (ETS) towards the positive pricing of energy demand reductions and carbon emission mitigations. Positive pricing turns their respective reduction and mitigation itself into a quasi-private good by turning ‘silences’ into investable resources.

The main technical difficulty of establishing such systems lies in the definition of baselines and measuring, reporting and verification vis-à-vis these baselines. The difficulties inherent in this approach are well documented but improved sensing technology, such as the Internet of Things (IoT), and distributed ledgers promise greatly improved granularity and automated time-stamping of all aspects of energy (non-)use at sub-second intervals. If structures of demand are clearly identified through target-driven market-based instruments and supply is facilitated through the assetization of ‘silences’ as quasi-private goods with clearly defined and enforced quasi-property rights, a clear incentive also exists to ensure that MRV structures are improved accordingly.

Key to the implementation of such target-driven market-based instruments are mechanisms to ensure that efforts are shared among organisations, sectors or countries, depending on the scale of implementation. Arguably, one of the reasons why the CDM failed in many aspects was because of the difficulty of proving additionality. This concept was supposed to ensure that only projects that could prove their viability based on the availability of funds derived from the supply, trade and accumulation of CERs would be eligible for CDM registration.

The difficulty of proving additionally increases cost and complexity. To ensure that new mechanisms no longer require this distinction, a dynamic attribution of efforts is required. A mechanism to dynamically share efforts can also help address rebound effects inherent in energy efficiency and energy demand reduction efforts. Key is the target-driven nature of associated market-based instruments and the equitable distribution of the rebound through a dynamic mechanism which shares any rebounds (i.e. increases in carbon emissions) equitably among organisations, sectors or countries. With an appropriate effort-sharing mechanism in place, the demand and supply of ‘silences’ can be aligned with targets aiming to maintain atmospheric GHG emission concentrations in line with levels conducive to human habitation and the ecosystems that support us.

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This blog is written by Cabot Institute member Dr Colin Nolden, a Vice Chancellor’s Fellow in sustainable city business models. The blog has been reposted with kind permission of World Sustainable Energy Days. If you would like to read more on this topic, you can read Colin’s research paper here.

Colin Nolden

 

Why we need a new science of safety

Posted on by janet.crompton

It is often said that our approach to health and safety has gone mad. But the truth is that it needs to go scientific. Managing risk is ultimately linked to questions of engineering and economics. Can something be made safer? How much will that safety cost? Is it worth that cost?

Decisions under uncertainty can be explained using utility, a concept introduced by Swiss mathematician Daniel Bernoulli 300 years ago, to measure the amount of reward received by an individual. But the element of risk will still be there. And where there is risk, there is risk aversion.
Risk aversion itself is a complex phenomenon, as illustrated by psychologist John W. Atkinson’s 1950s experiment, in which five-year-old children played a game of throwing wooden hoops around pegs, with rewards based on successful throws and the varying distances the children chose to stand from the pegs.

The risk-confident stood a challenging but realistic distance away, but the risk averse children fell into two camps. Either they stood so close to the peg that success was almost guaranteed or, more perplexingly, positioned themselves so far away that failure was almost certain. Thus some risk averse children were choosing to increase, not decrease, their chance of failure.

So clearly high aversion to risk can induce some strange effects. These might be unsafe in the real world, as testified by author Robert Kelsey, who said that during his time as a City trader, “bad fear” in the financial world led to either “paralysis… or nonsensical leaps”. Utility theory predicts a similar effect, akin to panic, in a large organisation if the decision maker’s aversion to risk gets too high. At some point it is not possible to distinguish the benefits of implementing a protection system from those of doing nothing at all.

So when it comes to human lives, how much money should we spend on making them safe? Some people prefer not to think about the question, but those responsible for industrial safety or health services do not have that luxury. They have to ask themselves the question: what benefit is conferred when a safety measure “saves” a person’s life?

The answer is that the saved person is simply left to pursue their life as normal, so the actual benefit is the restoration of that person’s future existence. Since we cannot know how long any particular person is going to live, we do the next best thing and use measured historical averages, as published annually by the Office of National Statistics. The gain in life expectancy that the safety measure brings about can be weighed against the cost of that safety measure using the Judgement value, which mediates the balance using risk-aversion.

The Judgement (J) value is the ratio of the actual expenditure to the maximum reasonable expenditure. A J-value of two suggests that twice as much is being spent as is reasonably justified, while a J-value of 0.5 implies that safety spend could be doubled and still be acceptable. It is a ratio that throws some past safety decisions into sharp relief.

For example, a few years ago energy firm BNFL authorised a nuclear clean-up plant with a J-value of over 100, while at roughly the same time the medical quango NICE was asked to review the economic case for three breast cancer drugs found to have J-values of less than 0.05.

Risky business. shutterstock

The Government of the time seemed happy to sanction spending on a plant that might just prevent a cancer, but wanted to think long and hard about helping many women actually suffering from the disease. A new and objective science of safety is clearly needed to provide the level playing field that has so far proved elusive.

Putting a price on life

Current safety methods are based on the “value of a prevented fatality” or VPF. It is the maximum amount of money considered reasonable to pay for a safety measure that will reduce by one the expected number of preventable premature deaths in a large population. In 2010, that value was calculated at £1.65m.

This figure simplistically applies equally to a 20-year-old and a 90-year-old, and is in widespread use in the road, rail, nuclear and chemical industries. Some (myself included) argue that the method used to reach this figure is fundamentally flawed.

In the modern industrial world, however, we are all exposed to dangers at work and at home, on the move and at rest. We need to feel safe, and this comes at a cost. The problems and confusions associated with current methods reinforce the urgent need to develop a new science of safety. Not to do so would be too much of a risk.

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The ConversationThis blog is written by Cabot Institute member Philip Thomas, Professor of Risk Management, University of Bristol.  This article was originally published on The Conversation. Read the original article.

Philip Thomas

Is population growth good or bad for economic development? Part 2

Posted on by janet.crompton

This blog has been reposted with kind permission from the LSE International Growth Centre blog.  In the previous post we described the shifting views of economists and demographers regarding the relationship between population growth and economic development. In short, rapid population growth in developing countries was thought to be a problem in the 1950s and 1960s, irrelevant (or even positive) in the 1970s and 1980s, and again an obstacle to robust economic growth from the mid-1990s up until today. Moreover, these changing views were very much in line with the evidence available for each period. How can we explain this?
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There is currently no consensus on the matter. But we argue that this is an instance where historical context really matters for models of economic development and interpreting empirical data.

The post-WWII boom and bust

Since the end of World War Two, there have been two quite distinct sub-periods to world economic growth, which are well documented by economic historians ([i],[ii]). The first was the post-war economic boom, which ended around 1973. As Table 1 shows, the global economy grew very rapidly between 1950 and 1973. Indeed, wealth was created more quickly during this period than any other—either before or since.

It was an era of extraordinary political and economic change characterised by decolonisation, the rapid diffusion of knowledge and technology around the world, booming international trade, and high levels of public and private investment in the growing number of sovereign nations. It was also a period of historically unprecedented population growth, driven in large part by rapid declines in death rates, primarily in poorer countries.

Table 1

This all changed in the early 1970s. The collapse of the Bretton Woods system and rising inflation exposed the world economy to the risk of recession—a risk that was realised with the first Arab oil embargo in 1973. A further oil price shock in 1977, a series of debt crises in developing economies in the 1980s, and the disintegration of the USSR around 1990 led to a sustained period of economic malaise, with the notable exception of rapid growth in some East Asian countries.

Between 1973 and 1990 in particular, global GDP per capita growth slowed considerably. Despite a slight recovery between 1990 and 2008, GDP per capita never regained the momentum of the post-war ‘Golden Age’. Since 2008, global growth has been downright miserable.

Rapid economic growth mitigates the potential negative impact of rapid population growth

In considering these trends, two key observations must be made. First, accelerated population growth in the post-war boom years was stimulated largely by the diffusion of medical knowledge, technologies, and public health initiatives that dramatically reduced death rates from infectious and parasitic diseases ([iii],[iv]). This coincided with a period of rapid economic growth. However, importantly, sustained improvements in mortality did not depend on sustained economic growth. Among other things, this is evident from the fact that there is no obvious correspondence in Table 1 between population growth rates and GDP growth rates at the global level.

sustained improvements in mortality did not depend on sustained economic growth

Second, in a surging world economy (i.e. between 1950 and 1973) poorer countries benefited from a positive investment environment and burgeoning employment opportunities. At both the household level and the aggregate macroeconomic level this buoyant economic environment likely helped mitigate the economic strains associated with the larger family sizes and accelerated population growth that characterised the period.

When times are tough, family size matters more

After 1973, mortality continued to decline in most countries despite stagnating output. This meant that, in the aggregate, there was less output produced (e.g. income) per person. Sluggish global growth also meant that the pie of investment and employment opportunities shrank, rendering larger families a greater economic liability at both the household and the macroeconomic level.

With less income-earning opportunities, but the same number of children, households must cut spending—in some cases they may even need to pull children from school and put them to work. In the aggregate, this translates into lower savings, less investment, and a workforce that may ultimately be less productive (if less educated or unhealthy).

In sum, the negative impacts of rapid population growth were masked in the earlier period by a buoyant global economy and mortality decline that happened to accompany rapid economic growth, but was not ultimately dependent upon this growth. When this unique episode of global economic history came to an end in 1973, the underlying negative association between population growth rates and economic growth rates was revealed.

the negative impacts of rapid population growth were masked in the earlier period by a buoyant global economy and mortality decline that happened to accompany rapid economic growth

We can see this in Table 2, which presents a very simple regression model periodised in line with our interpretation of the role of history in shaping the statistical relationship between population growth and economic growth. We look at changes in the relationship over the entire time period, and within each of the two discrete economic periods outlined in the historical analysis above.

In column 1, we find a clear negative and statistically significant correlation between these variables when considered over the long run (i.e. between 1950 and 2008) and controlling for initial GDP per capita. In column 2, which covers the economic boom period from 1950 to 1973, we find no statistically significant relationship between these variables. The negative and highly statistically significant relationship returns, however, when we consider the period of economic slow-down after 1973, as we expected.

Table 2

This model is clearly highly stylised: economic growth performance depends on a wide range of factors beyond population dynamics, such as investment, trade, education, and the quality of political and economic institutions. Our key point is that properly periodising the simple cross-sectional models that have been at the heart of so much debate (and policy) provides some important insight into the matter.

If our interpretation of the data is correct—i.e. if global economic circumstances do indeed mediate the relationship between demographic change and economic performance—then the post-2008 regime of weak global growth doesn’t bode well for poor countries with high birth rates.

While there has been a modest resurgence of interest in family planning initiatives among international development organisations in recent years, much more could be done to ensure that all adults (and women in particular) have the means to choose how many children they have. Indeed, the UN estimates that today there are about 225 million women who do not want to become pregnant, but are not using safe and effective means of family planning.

if global economic circumstances do indeed mediate the relationship between demographic change and economic performance—then the post-2008 regime of weak global growth doesn’t bode well for poor countries with high birth rates.

The challenge is a particularly urgent for many countries in Africa and the Middle East—where the potential micro and macroeconomic benefits of reducing very high fertility levels are likely to be considerable.

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This blog is written by Cabot Institute member Dr Sean Fox from the University of Bristol’s School of Geographical Sciences.

Sean Fox

Note on sources

All data up to 2008 used in these posts were derived from Angus Maddison’s Statistics on World Population, GDP and Per Capita GDP, 1-2008 AD; data for 2008-2014 is from the World Bank’s World Development Indicators. Our sample for Figure 1 and the Table 2 consists of all countries with a population of 5 million or more in 2008 for which data were available. 102 countries fit these criteria and collectively represent 94% of the world’s population.

[i] A. Maddison, Contours of the World Economy, 1-2030 AD, (Oxford University Press, Oxford, 2007).

[ii] Frieden, Jeffry A. (2006) Global Capitalism: It’s Fall and Rise in the Twentieth Century, New York: W.W. Norton & Company, Inc.

[iii] Preston, Samuel H. (1975) ‘The changing relationship between mortality and level of economic development’, Population Studies, Vol. 29 (2): 231-248.

[iv]Cutler, David, Deaton, Angus and Adriana Lleras-Muney (2006) ‘The Determinants of Mortality’, Journal of Economic Perspectives, Vol. 20 (3): 97-120.

Is population growth good or bad for economic development? Part 1

Posted on by janet.crompton

This post is the first in a two part series exploring the relationship between population growth and economic development – a relationship that appears to have changed over time.  This blog has been reposted with kind permission from the LSE International Growth Centre blog.
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The relationship between population growth and economic development has been a recurrent theme in economic analysis since at least 1798 when Thomas Malthus famously argued that population growth would depress living standards in the long run. The theory was simple: given that there is a fixed quantity of land, population growth will eventually reduce the amount of resources that each individual can consume, ultimately resulting in disease, starvation, and war. The way to avoid such unfortunate outcomes was ‘moral restraint’ (i.e. refraining from having too many children). He didn’t foresee the technological advances that would raise agricultural productivity and reduce the toll of infectious diseases—advances that have enabled the world’s population to grow from 1 billion in 1798 to 7.4 billion today.

Nevertheless, his essential insight that population growth constitutes a potential threat to economic development remained influential and informed international development policy agendas, especially in the 1950s and 1960s—a period marked by unprecedentedly rapid rates of population growth in many developing countries.

given that there is a fixed quantity of land, population growth will eventually reduce the amount of resources that each individual can consume, ultimately resulting in disease, starvation, and war.

Quantity vs Quality: How family sizes affect investment

At that time, the general view of economists was that high birth rates and rapid population growth in poor countries would divert scarce capital away from savings and investment, thereby placing a drag on economic development. They hypothesized that larger families have fewer aggregate resources and fewer resources per child. Larger families therefore spread their resources more thinly to support more children. This leaves less for saving and investing in growth-enhancing activities. It also reduces spending on enhancing the economic potential of each child (e.g. through education and health expenditures).

In the aggregate, these household level consequences of high birth rates were believed to exert a significant negative effect on per capita income growth ([i],[ii],[iii]).

high birth rates and rapid population growth in poor countries would divert scarce capital away from savings and investment, thereby placing a drag on economic development

This view underpinned the major rise in international funding for family planning in the 1960s and 1970s, with the aim of reducing birth rates and hence rates of population growth.

Forget moral restraint, was Malthus wrong?

In the 1970s numerous empirical studies, utilising the growing volume of comparable international data, failed to detect a robust relationship between national population growth rates and per capita income growth ([iv], [v]).

Writing in Science in 1980, Julian Simon summarised this research, emphasising that “[e]mpirical studies find no statistical correlation between countries’ population growth and their per capita economic growth”. Indeed, he maintained long run effects were positive ([vi]). This more sanguine view influenced the policy position of the US government at the World Population Conference in Mexico City in 1984—namely that “population growth is, by itself, a neutral phenomenon [with respect to economic growth]” ([vii]). This view arguably contributed to a major fall in international funding for family planning programs, beginning in the 1990s ([viii]).

But the story doesn’t end there. In the 1990s researchers made two discoveries that questioned the neutrality of population growth with respect to economic development. First, analyses of the remarkable economic trajectory of East Asian countries in the late 20th century suggested a sizeable fraction of their impressive economic growth was attributable to high levels of savings and investment facilitated by earlier fertility declines ([ix], [x]). Second, new research suggested that there was in fact a negative association between population growth and economic performance.

A population’s age composition matters for economic growth

When fertility rates decline over a sustained period of time the proportion of the working age population (i.e. over 15) grows relative to the economically dependent youth population. This change in age composition creates a window of opportunity during which a country can potentially raise its level of savings and investment—a phenomenon now known as the ‘demographic dividend’. This finding prompted a subsequent reconsideration of the potential importance of reducing fertility in pursuit of growth.

change in age composition creates a window of opportunity during which a country can potentially raise its level of savings and investment—a phenomenon now known as the ‘demographic dividend’.

The second key discovery in the 1990s was the emergence of a negative correlation between population growth and economic growth in further analyses of international cross-sectional data ([xi], [xii]). In 2001, Birdsall and Sinding summarised the new position, stating that “in contrast to assessments over the last several decades, rapid population growth is found to have exercised a quantitatively important negative impact on the pace of aggregate economic growth in developing countries” ([xiii]). A recent meta-analysis of this research concluded that a negative relationship emerged in the post-1980 data, and that its strength has increased with time ([xiv]).

Figure 1: Population growth and economic growth, 1950-2008

Moreover, as Figure 1 illustrates, the simple cross-sectional relationship between population growth and economic growth is clearly negative when viewed over the long run (i.e. 1950-2008).

Next time: Can economic history settle the debate between demographers and economists?

What explains the discrepancy between the early research, which found little evidence of a relationship between population growth and economic growth in cross-sectional data, and more recent work which finds a negative and significant one? We will tackle this question in our next post, which examines the unique economic history of the 20th century, and how this might help explain why economists seem to keep changing their mind—and why demography is more important than ever in a post-2008 global economy.
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This blog is written by Cabot Institute member Dr Sean Fox from the University of Bristol’s School of Geographical Sciences.  Read part two.

Sean Fox

 

Notes & further reading

[i] A. J. Coale and E. M. Hoover, Population and Economic Development in Low-Income Countries, (Princeton University Press, Princeton, 1958).

[ii] Kuznets, Simon (1960) ‘Population change and aggregate output,’ in Demographic and Economic Change in Developed Countries. Princeton: Princeton University Press.

[iii] S. Kuznets, Pro. Am. Phil. Soc. 111, 170 (1967).

[iv] S. Kuznets, Pro. Am. Phil. Soc. 111, 170 (1967).

[v] S. Kuznets, in The Population Debate: Dimensions and Perspectives, Volume 1, (United Nations, New York, 1975).

[vi] J. L. Simon, The Ultimate Resource, (Princeton University Press, Princeton, 1981).

[vii] Policy Statement of the United States of America at the United Nations International Conference on Population, reproduced in Popul. Dev. Rev. 10 (3), 574 (1984).

[viii] J. Bongaarts and S. W. Sinding, Int. Perspect. Sex Reprod. Health 35(1), 39 (2009).

[ix] D. E. Bloom and J. G. Williamson, World Bank Econ. Rev. 12(3), 419 (1998).

[x] A. Mason, Ed. Population Change and Economic Development, (Stanford University Press, Stanford, 2001).

[xi] J. A. Brander and S. Dowrick, J. Popul. Econ. 7(1), 1 (1994).

[xii] R. J. Barro and X. Sala-i-Martin, Economic Growth, (MIT Press, Cambridge Mass, 2004).

[xiii] N. Birdsall and S. W. Sinding in Population Matters—Demographic Change, Economic Growth, and Poverty in the Developing World, N. Birdsall, A. C. Kelley and S. W. Sinding, Eds. (Oxford University Press, Oxford, 2001).

[xiv] D. D. Headey and A. Hodge Popul. Dev. Rev. 35(2), 222 (June 2009).

COP21 daily report: Will we trust governments on climate?

Posted on by janet.crompton
Cabot Institute Director Professor Rich Pancost will be attending COP21 in Paris as part of the Bristol city-wide team, including the Mayor of Bristol, representatives from Bristol City Council and the Bristol Green Capital Partnership. He and other Cabot Institute members will be writing blogs during COP21, reflecting on what is happening in Paris, especially in the Paris and Bristol co-hosted Cities and Regions Pavilion, and also on the conclusion to Bristol’s year as the European Green Capital.  Follow #UoBGreen and #COP21 for live updates from the University of Bristol.  All blogs in the series are linked to at the bottom of this blog.
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Whatever comes of the climate summit that kicked off Monday in Paris, the negotiations will be intense. Signatories of the UN’s Framework Convention on Climate Change meet every year, but this year is exceptional. The stakes are high, with governments and their negotiators seeking to finalize a landmark treaty that will guide the world’s actions for many years to come with respect to greenhouse gas emissions and the climate change they cause.

Despite the heat that the negotiations in Paris will surely generate, though, in a sense dealing with climate change could actually be… surprisingly easy. The world’s leading climate economist thinks it would cost only about 2% of GDP to get the world on track to avoid the worst effects. That’s not a lot to pay to solve perhaps the most serious challenge confronting humanity.

Why then is it proving so hard for us to buy a climate-friendly economy?

Part of the problem is that public opinion is pretty hostile to the number one thing that could get us there: making polluters pay taxes if they want to pollute.

The logic is simple. People buy less of something when it gets more expensive. Raising the price of polluting activities is therefore the most effective, direct, and time-tested way of getting people to live–produce and consume–in ways that cause less damage to the environment.

“Raising the price of polluting activities is therefore the most effective, direct, and
time-tested way of getting people to live–produce and consume–in
ways that cause less damage to the environment” ~ Malcolm Fairbrother.

In principle, there should be no reason for people not to like the idea. Governments can lower taxes on things that do no harm (income and labour) while raising them on things that do (emitting greenhouse gases, leaching waste into groundwater, driving a car on congested streets at rush hour). Tax shifts of this kind have no net effect on public finance, and at most a very small one on household budgets–but they can make a big dent in environmental degradation.

Take the case of Canada. In 2008, a right-of-centre government in the western province of British Columbia (BC) introduced a C$30/ton tax on carbon emissions. The rest of Canada did not. Over the course of the next several years, consumption of fossil fuels in British Columbia dropped significantly, while consumption elsewhere didn’t. Meanwhile, BC enjoyed faster economic growth than the average across the other provinces.

But cases like British Columbia’s are exceptional. In most places, public opinion has been too hostile to new taxes of any kind for governments to raise taxes even on pollution and the use of scarce resources. In 2013, for example, Australians voted out a government that had brought in a carbon tax much like British Columbia’s, and they voted in a government that repealed the tax. Earlier this year, the Swiss voted down new carbon taxes in a referendum.

Perhaps the biggest reason why people around the world don’t want green taxes is political distrust. Even though such taxes have a great track record, people simply don’t trust governments to make good use of taxes–of any kind. They worry that tax revenues disappear into the pockets of politicians and bureaucrats, never to be seen again. Some think it’s unfair to tax people for behaviours that are hard to avoid–like heating your home or catching a flight for the occasional family holiday. So they don’t like green taxes, and that’s true even though most people say they believe in the seriousness of climate change, and of environmental problems generally.

To illustrate the point, in an experiment I conducted in Britain last year, I randomly assigned survey respondents to different versions of a question about their willingness to pay higher taxes to protect the environment. People were much more open to the idea if they were told that other taxes they pay would be reduced to compensate. So it seems that revenue neutrality can win over a lot of people. But telling respondents that the offsetting cuts to other taxes were only a government “promise” reduced much of the positive impact of revenue-neutrality. Clearly, government promises don’t cut much weight, at least with Britons. (Experiments with other populations elsewhere are ongoing.)

Advocates for better environmental policy have typically focussed on getting the word out about the seriousness of the problems the policies are meant to address. But, in another recent study, I conducted a head-to-head test of the scope for expanding public acceptance of environmental taxes if only one of (a) concerns about environmental problems or (b) political trust were to increase. Because there is already a lot of concern about environmental problems, but not a lot of political trust, it turns out that the potential impact of the latter looks much greater in most countries.

For that reason, along with alerting people to all the ways in which people are doing serious harm to the environment globally and locally, it would also be good to get the word out about the many environmental policies that have been tremendously successful. Globally, we’ve built a regime to stop depleting the ozone layer; many countries have reduced acid rain dramatically; some formerly endangered species are no longer endangered. If more people thought about how much good past environmental policies have done, they might be more inclined to support efforts to do more.

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This blog is written by Cabot Institute member Dr Malcolm Fairbrother, from the School of Geographical Sciences at the University of Bristol.  This blog has been reposted with kind permission from Policy Trajectories, the blog of the American Sociological Association’s Section on Comparative and Historical Sociology.
This blog is part of a COP21 daily report series. View other blogs in the series below:
Monday 30 November: COP21 daily report
Tuesday 1 December: Setting a more ambitious agenda – Bristol’s Transformative Action Plans
Wednesday 2 December: Reflecting on the science of climate change
Thursday 3 December: The politics and culture of climate change
Friday 4 December: Be brave, work together and involve the next generation
Monday 7 December: While the politicians negotiate, the science does not stop

My ‘Climate Shock’ from a talk by Gernot Wagner

Posted on by janet.crompton

Sadly, the climate change rhetoric can sometimes feel a bit like the announcements at an airport; a little monotonous and irrelevant. Most of us have been guilty of tuning out, turning a blind eye and continuing with our life thinking the announcement isn’t really for us; we’re getting a different flight.

Sitting down for the hour long talk by Gernot Wagner at @Bristol on Tuesday evening was a little like hearing the last boarding call when you’re at the other end of the airport in a day dream. It was a shock.

‘Climate Shock’ was an hour of uncomfortable truths and mind boggling economics. As a scientist I am regularly exposed to the raw figures: Temperature in degrees, CO2 in parts per million, mean sea level increase. Never before had I been faced with the human implications of climate change in such stark and uncompromising terms.

The talk was run by Bristol Festival of Ideas and supported by the University of Bristol’s Cabot Institute and slotted in comfortably with Bristol’s position as green capital of the Europe. Gernot Wagner walked us through his recent book ‘Climate shock’, co written with Martin Weitzman. At each turn of the page (or change of the slide) there was a new, fresh perspective on the climate change debate. Instead of seeing the problem and solution in science, Wagner saw it in economics.

With the cool detachment of a mathematician, Wagner attempted to communicate the uncertainties in our climate change predictions. Despite a considerable accumulation of knowledge, we are still powerless to predict the exact effect on our fragile planet. Wagner pointed out that, should temperatures rise by 6 degrees, the effects would be catastrophic. We are only a fraction of the way down the slippery slope of temperature increase and despite an escalation in extreme weather we still aren’t digging in our heels and climbing back up. With any other predictable, large-scale disasters we work tirelessly to insure and mitigate. Why, Wagner asked, are we not doing the same for climate change?

$0.40

Using economics to convey the potential impacts, Wagner stated plainly that for every $1 we spend on CO2 producing activities, it is actually costing us $0.40 in future damages. We are already a planet in debt.

Wagner’s solution was atypical. Instead of sending us forth from the room as eco warriors, recycling like our lives depended on it, he emphasised a different message. He said the way to mitigate global warming is to harness the economic power of supply and demand.

$150

His case study was Sweden. He introduced it with a single figure: $150.

This is the Swedish tax on each ton of CO2: as the price of CO2 went up, demand went down. Now, Wagner claimed, Sweden is nearly carbon neutral. His argument is that policy is the way to save the world- far more so than individual effort.

The realism of his suggestions made his talk fascinating. For the first time I not only grasped the terrifying toll that climate change is taking, but also felt hopeful that there might be a solution. While the solution might be unpopular in our short sighted capitalist society, it is absolutely essential for maintaining long term economic stability.

The moral of the story? The best investment you will ever make is in our planet.
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This blog is written by Cabot Institute member Keri McNamara, a PhD student in the School of Earth Sciences at the University of Bristol.

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