Human Induced Climate Change & Economics

This webpage entry covers the evolution of my work on the topic of economics and human induced climate change, citing influences and the placement of different ideas, as part of my personal development in understanding the topic.  There is a separate entry covering my book on the economics of human induced climate change or, more scientifically, the enhanced Greenhouse Effect, can be found by clicking here.  My struggle in Australia against the censorship and banning of my work critical of carbon trading, while employed as a Senior Civil Servant for the Australian Government, can be found by clicking here.

My most recent work on climate economics is a critical appraisal of, and commentary on, the promotion of economic growth as the solution to climate change.  I have written two complementary pieces concerning the 2015 Paris Agreement. One appeared as an invited commentary in the journal Globalizations (Spash 2016a), while the other was a piece written for the Real World Economic Review (Spash 2016b).

Personal Research History
My interest in the human enhancement of the natural Greenhouse Effect grew as part of a progression of research on atmospheric pollution.  My studies and work moved from sulphur dioxide to acidic deposition to tropospheric ozone to stratospheric ozone and then pollutants affecting the upper atmosphere and climate. Climate change is far more challenging than the other issues because it combines all their elements (e.g., health impacts, materials damage, transfrontier pollution) and makes a lot of others more pressing and present (e.g. intergenerational ethics, international resource use, inequity and social injustice, the role and failures of international law and politics, science and society interactions).

My initial interest in this topic was stimulated in the mid-1980s by hearing a talk while studying at the University of British Columbia. I went to a public lecture by an ambassador and policy analyst from the USA who had been involved in negotiations between the USA and Canada on acidic deposition. He was particularly scathing of the Regan administration’s position on acidic deposition and their cynical treatment of the environmental movement in general.  For anyone living in Canada at the time this was no big surprise (although unusual from a person within the administrative power structures of the USA). Ronald Regan had been producing outrageous statements along the lines of ‘the Canadian trees are the problem not the emission from the coal fired power stations of the USA’. Anyway, the policy analyst finished by pointing out the next big issue would be human induced climate change. He remarked that, in light of his recent experience on acidic deposition, he fully expected no action on this front by the USA “until New York is under the waves”. That was around 1986 or 1987.

Shortly after this I was enrolled at the University of Wyoming, and within a year had switched my doctoral thesis from tropospheric ozone pollution to the enhance greenhouse effect. Ralph d’Arge had heard of my interest and asked to be my supervisor. He’d worked on the issue since the early 1970’s, which made him one of the first economists to do so, and he’d stuck with it, unlike some others. His interest was in intergenerational (compensatory) transfers and so I developed work on this issue, while also pursuing the topics of values and ethics relating to climate change. Ralph was also one of the pioneers of the contingent valuation method and I worked on this as well.

From the doctoral work and collaboration with Ralph there came journal articles and book chapters. The first was based on one of my coursework papers, and appeared in a special issue, edited by David Pearce, for which Ralph had been asked to contributed something. This paper was based on playing with some intergenerational modelling, but more importantly was beginning to raise the issues of compensation for harm (Spash and d’Arge, 1989). I presented the work at the Western Economic Association meeting.  I was welcomed with some sarcastic hecklers comment about ‘how young and different you are looking these days Ralph’ (clearly people having come expecting to see my co-author and not me!). A more academic quibble was the fact that I presented new categories of intergenerational transfer and who was I to do such a thing!  The underlying issue was questioning the foundation of the economic value theory, where all damages can be compensated by an appropriate transfers of consumer goods to balance up the devastated environment they also get as a result of producing those goods in the first place (an issue of incommensurability).

A year or so later Ralph was invited to give a plenary speech at the inaugural meeting of the International Society for Ecological Economics, at the World Bank in Washington D.C., and again he asked me if I had something we could present as co-authors with a joint plenary credit. I worked on the paper and briefed Ralph who had me sit in the front row at the conference in case there were any technical questions. There was no need because Ralph actually did a free-wheeling presentation that departed form the paper in about 30 seconds. The paper that I had written appeared as a co-authored book chapter in the conference volume (d’Arge and Spash, 1991). It attempted to bring in some issues around the inequity (intragenerational distribution) of impacts across income classes in addition to the typical (and highly limited) discussion of the time that only talked of impacts across generations. The whole issue was in fact regarded as something so long term it only concerned the relatively distant future.

The doctoral work led me to concerns over ethics (Spash, 1993a). The contrast was one between the orthodox economic approach being based upon preference utilitarianism and the alternative being a rights-based (deontological) approach, which seemed strikingly relevant but almost totally ignored by economists (Spash, 1994a). My work at this time also aimed to further clarify the distinction between two types of intergenerational compensation: those undertaken to address concerns over equitable resource distribution and those undertaken to redress deliberate inflictions of harm on others for economic gain (Spash, 1994b).

During this period I became highly sceptical of formalistic modelling in economics and dropped my earlier mathematical work on intergenerational models.  My scepticism was increased by reviewing the book by Tim Swanson about using optimal control models to explain how to efficiently account for species extinction [click here for the book review].  I had recently moved to the Dept. of Land Economy at Cambridge University (Tim had a post in the Economics Dept.) and we discussed my critical book review of his work and also my own intergenerational equity models on climate change compensation.  After this I was convinced that the formalistic modelling approach was a total waste of time and energy.  It neither addressed the reality of the problem nor persuaded anyone (like Tim) of the importance of the issues it raised.  The modelling approach was highly abstracted from reality in ways that made it totally unscientific.  At the same time, those who might object to any conclusions could merely create ad hoc adjustments; those would need replies that would be responded to by further ad hoc adjustments; those would stimulate responses and so on … forever. It was indeed a useless form of deduction and only good for arguing with others engaged in the same activity and unconcerned by reality. I dropped the models and several years work. I then became increasingly critical of other economic modelling on climate change (Spash, 1996).

I was also questioning the use of cost-benefit calculations with their author’s obsession over discounting and discount rates as the central topic, and the reliance on universal commensurability. While embedded-in and restricted by mainstream economic formalism, my doctoral dissertation had included several aspects challenging the basic assumptions of accepted mainstream theory. My increasing scepticism over mainstream economics was boosted by the extreme positions being taken by David Pearce, using work by his doctoral student Sam Fankhauser, and their collaboration with Richard Tol the doctoral student of Pier Vellinga. As lead authors for the Intergovernmental Panel on Climate Change, Pearce and Vellinga employed their doctoral students work to support the chapter they were responsible for producing. That chapter advocated global cost-benefit calculations that included valuing the life of a financially wealthy countries’ citizens 15 times higher than those of a poor country; implying the acceptability of allowing the poor to die in order to save the rich on the grounds of economic efficiency.  Pearce, Fankhauser and Tol defended this position despite the political uproar it provoked at the time (see “Loading the Dice?” Chapter 7 of my Greenhouse Economics book).

Around this time ecological economics in Europe became established and I was elected as Vice President of the European Society for Ecological Economics.  This created a critical social science perspective and more radical economic approach.  Here was a community that expressed all the concerns I already had about the economics of climate change, although at this time people like Pearce were also involved (but not for long).  Ecological Economics also offered the potential for linking an understanding of biophysical and social reality rather than being preoccupied with formalistic modelling as an activity in itself.

Building from aspects of my doctoral work, and my critical understanding obtained since its completion, I spent some years writing my book Greenhouse Economics: Value and Ethics. This aimed to provide an interdisciplinary overview and critical appraisal of the economics and policy on climate change, moving from the science, through the economics to the ethics.  The book has the following chapters:

1. Climate Change: Introducing Some of the Issues (PDF)
2. Scientific Understanding of the Enhanced Greenhouse Effect
3. Impacts of Global Climate Change
4. Weak Uncertainty: Risk and Imperfect Information (PDF)
5. Strong Uncertainty: Ignorance and Indeterminacy (PDF)
6. Calculating the Cost and Benefits of GHG Control
7. Loading the Dice? Values, Opinions and Ethics (PDF)
8. Dividing Time and Discounting the Future
9. Economics, Ethics and Future Generations (PDF)
10. Science, Economics and Policy

A core part of this book is on uncertainty and involves making the distinction between weak and strong uncertainty; a categorical necessity recognised by economists such as Frank Knight and John Maynard Keynes, but since largely ignored. This is a major failure of the IPCC and the risk management approach still being advocated by the likes of Lord Stern.

After the book I turned to other topics for some years, such as biodiversity valuation. Then in 2006 the report to the UK government by Stern, former chief economists at the World Bank, appeared.  Many environmentalists and ecological economists, and perhaps the vast majority of both, thought this a brilliant report highlighting the need for action.  My response was somewhat different.  I read initially with great interest and hope and was soon disappointed by the standard economists trick of talking big and doing little.  Talk of ethics was quickly converted into the utility of consumption that could compensate even death; strong uncertainty and ignorance was reduced down to some probabilities suitable for risk management.  I wrote several short pieces on the topic and a substantive journal article (Spash 2007).  This critique led to a collaboration with Paul Baer with whom I wrote a discussion paper that was later published as a book chapter (Baer and Spash 2009) that extended the critique and specifically highlighted the failures of Stern et al. in claiming temperatures between 2 to 4 degrees Celsius were an acceptable level of global warming based on their economic models incorporating expected utility analysis. Stern has since back tracked on that major blunder, going with the international bandwagon on 2 degrees, but few seem to have noticed amidst the general clamour to claim the Review a major success in providing a rigorous economic perspective on climate change.

Indeed the failures of the approach have in part been recognised by Stern himself (e.g. in derision now poured on integrated assessment models), although this has not prevented the continued use of the underlying mainstream economic approach in the latest work he has sponsored. The push has moved from justifying action to pressing for technology and  innovation, promoting corporations as saviour and seeing economic growth as the answer to poverty and climate change. This bizarre and twisted logic is encapsulated in the report entitled ‘Better Growth, Better Climate’, strategically released prior to COP 20 and heavily promoted by its elite supporters including ex-Presidents, corporations, bankers and financiers.

I was inspired to comment on this by an invitation to contribute to a piece for the The Guardian Newspaper in the UK, which they had asked the 2014 Degrowth Conference press officer to compile, but then refused to publish. Rather than let this go to waste, and having found the report awful, I worked this into the full discussion paper entitled: “Better Growth: Helping the Paris COP-out“.  The 2015 Paris Agreement is in many ways a major fulfillment of the goals set out by this powerful elite, whose main concern is to maintain the current system of capital accumulation that is encapsulated in the utopian vision that is the modern growth economy (more commonly now termed ‘sustainable development’).

I have two different and complementary short commentaries on Paris now available.  One was an initial reaction to and deconstruction of the Paris declaration and the associated legal Agreement which closely focused on the text (Spash 2016a). The other is a piece that puts the Agreement into a political economy and historical context (Spash 2016b).

At present my aim is to pursue research that makes clear the actual results from the world’s current economic systems of production and consumption that are locked-in to patterns of greenhouse gas emissions.  The contradictions in hopes for decoupling, extensive economic growth, Green economies and much else offered as ‘solutions’, need to be the topic of new critical research in the social sciences.  The necessity of and requirements for real social ecological transformation are an inevitable part of humanity’s increasingly uncertain future, and should be taken far more seriously than in current public policy.

References
d’Arge, R.C., Spash, C.L., 1991. Economic strategies for mitigating the impacts of climate change on future generations, in: Costanza, R. (Ed.), Ecological Economics: The Science and Management of Sustainability. Columbia University Press, New York, pp. 367-383.

Spash, C.L., 1993a. Economics, ethics, and long-term environmental damages. Environmental Ethics 15, 117-132.

Spash, C.L., 1993b. Intergenerational Transfers and Long Term Environmental Damages: Compensation of Future Generations for Global Climate Change due to the Greenhouse Effect, Department of Economics. University of Wyoming, Laramie, p. 378.

Spash, C.L., 1994a. Trying to find the right approach to greenhouse economics: Some reflections upon the role of cost-benefit analysis. Analyse & Kritik: Zeitschrift fur Sozialwissenschafen 16, 186-199.

Spash, C.L., 1994b. Double CO2 and beyond: Benefits, costs and compensation. Ecological Economics 10, 27-36.

Spash, C.L., 1996. Human-induced climate change: The limits of models. Environmental Politics 5, 376-380.

Spash, C.L., 2001. The Kyoto Protocol: A Guide and Assessment. Environ. Values 10, 556-558.

Spash, C.L., 2002. Greenhouse Economics: Value and Ethics. Routledge, London.

Spash, C.L., 2007. Problems in economic assessments of climate change with attention to the USA, in: Erickson, J., Gowdy, J. (Eds.), Frontiers in Environmental Valuation and Policy. Edward Elgar Publishing Ltd, Cheltenham, UK/Northampton, MA, USA.

Clive L. Spash (2007), Climate change: Need for new economic thought. (PDF) Economic and Political Weekly 10th February, 2007: 483-490.

Clive L. Spash (2007) The economics of climate change impacts à la Stern: Novel and nuanced or rhetorically restricted? (PDF) Ecological Economics 63 no.4: 706-713.

Paul Baer and Clive L. Spash (2009) Is Climate Change Cost-Benefit Analysis Defensible: A Critique of the Stern Review. (PDF) In Science for Policy. Edited by Ângela Guimarães Pereira and Silvio Funtowicz . New Delhi: Oxford University Press pp.167-192.

Clive L. Spash (2010) The Brave New World of Carbon Trading (PDF), New Political Economy, 15, no. 2: 169-195.

Clive L. Spash and Alex Y. Lo (2012) Australia’s Carbon Tax: A Sheep in Wolf’s Clothing? (PDF) Economic and Labour Relations Review February 23 no.1: 67-86.

Clive L. Spash (2014) The Politics of Researching Carbon Trading in Australia (PDF) In The Politics of Carbon Markets. Edited by Benjamin Stephan and Richard Lane. London: Routledge, pp.191-211.

Clive L. Spash (2015) Tackling climate change, breaking the frame of modernity. Environmental Values (external link) 24 no.4: 437-444.

Clive L. Spash (2014) Better Growth, Helping the Paris COP-out? Fallacies and Omissions of the New Climate Economy Report (external link).

Clive L. Spash (2016a) This changes nothing: The Paris Agreement to ignore reality (PDF) Globalizations 13 no.6: 928-933.

Clive L. Spash (2016b) The political economy of the Paris Agreement on human induced climate change: A brief guide (PDF) Real World Economics Review 75 June: 67-75.

Clive L. Spash, and Ralph C. d’Arge (1989) The greenhouse effect and intergenerational transfers Energy Policy, 88-95.