Citizen Action Monitor

Critics rip flawed plan promising win-win low-carbon growth economy with reduced climate risk — Pt 3: Rebuttal

In a devastating critical analysis, economics prof exposes gaping holes in biased New Climate Economy Report

No 1164 Posted by fw, October 10, 2014

“So what is the real concern in this report, climate change and the harm it poses to poor people and the planet or corporate profits, capital accumulation and a continued comfortable life for the global rich? Well, apparently the ultimate concern is the threat to the growth economy and that is what needs protecting above all else. As the report makes clear: ‘In the long term, if climate change is not tackled, growth itself will be at risk.’ That’s right. It’s the growth economy and those who are dependent upon it that are at risk and need protection. Better growth, better climate for business.” —Clive Spash

Just to recap, Part 1 of this 3-post series presented the New Climate Economy report’s 10-point Global Action Plan, listed the members of the report’s sponsoring Global Commission, and referenced an article by the Guardian newspaper, which provides a general overview of the Report. Part 2 featured a cutting rebuke of the Report, citing, in particular, the “misunderstanding” it produces.

Clive SpashIn this concluding post, Part 3, Clive Spash of the University of Economics and Business in Vienna, dissects the much publicized document released in September, 2014, Better Growth, Better Climate: The New Climate Economy Report. The report, argues Spash, is an elitist perspective on climate change, reflecting the concerns and views of the well-heeled self-selected members of the steering Committee – the most senior politicians, bankers and financiers. The report is a call for continued growth and, as Spash shows, it is deeply flawed theoretically and practically.

To read the complete 37-page (double-spaced) discussion paper, which is well worth reading, click on the following linked title. Alternatively, below is a much abridged version featuring just the Introduction and most of the Conclusion. To facilitate browsing and selective reading, copious subheadings of main ideas along with text highlighting have been added. In addition, a few hyperlinks have been included.

Better Growth, Helping the Paris COP-out?: Fallacies and Omissio37-page ns of the New Climate Economy Report by Clive L. Spash, Vienna University of Economics and Business, October 2, 2014

INTRODUCTION

The promise that a major climate economy breakthrough will come from the Report’s vested interests is “nothing but a fantasy”

As time passes the failure of the Conference of the Parties (COP) on climate change becomes seemingly inevitable. The expectation that a major breakthrough will come from the current vested interests supporting the resource extracting, fossil-fuel driven growth economies of the world seems nothing but a fantasy.   Yet this is what the document released in September 2014 called “Better Growth Better Climate: The New Climate Economy Report: The Synthesis Report” would like us to believe. Is this just another copout to help the COP out of their collective political failure?

Report argues for continued strong economic growth despite deepening social, environmental crises

The opening of this latest bid to claim the capital accumulating economies must continue growing, despite on-going social and environmental crises, is replete with rhetorical flourish. We are told, in no uncertain terms, that this report is “an objective, independent examination”, “grounded in reality”, using “the best available evidence”, “it proposes practical measures”. This is a strong set of statements claiming the status of a traditional academic scientific research project untainted by values or interests. Furthermore, the report states that: “The Global Commission on the Economy and Climate [GCEC] was set up to examine whether it is possible to achieve lasting economic growth while also tackling the risks of climate change” (GCEC 2014a p.8); so apparently they were open to the fact that this might not be possible?

Nicholas Stern, former World Bank economist and corporate executive, was contemptuous of any critics who might oppose continued economic growth

Well, think again! The lead persona in the GCEC is a former World Bank economist and corporate executive, Nicholas Stern, who on release of the report made clear:

“To those who want to knock out growth from objectives, I find they’re close to reprehensible … I think to say that we should just switch off growth is to miss big aspects of what matters about poverty. And so it worries me. It’s also politically very naive. If you turn it into a pissing contest between growth on the one hand and climate and environment on the other and say you’ve got to choose, you’re setting yourself up for failure.” (Confino 2014)

What the Global Commission sought was not independent objective research but “justification for a political agenda” – i.e. a pro-growth strategy

Indeed, we might suspect that what the GCEC produce are not scientific findings from independent objective research, but rather justifications for a political agenda that was set well in advance of any research.   In the Stern review of 2006 the message was: “Tackling climate change is the pro-growth strategy for the longer term, and it can be done in a way that does not cap the aspirations for growth of rich or poor countries.” (Stern et al. 2006 p.viii). “The [new] report’s conclusion is that countries at all levels of income now have the opportunity to build lasting economic growth at the same time as reducing the immense risks of climate change.” (GCEC 2014a p.8). Spot the difference?

And just who on the Global Committee are pushing a pro-growth agenda? – the self-selected members of this political elite — financiers and bankers, heads of international organizations, and economist Lord Stern

Let’s just repeat that, the central message in the new report is that: “we can create lasting economic growth while also tackling the immense risks of climate change” (GCEC 2014a p.7). Who are we?   Apparently the undefined global ‘we’ that hides all inequity and power relationships and pretends everyone is on an equal footing, without giving anyone except an elite voice to speak. Well in this case those speaking for the “global we” are a political elite (2 majors and 5 ex-heads of state of whom 2 now work for the UN) backed by (13) financers and bankers and (4) leaders of international organisations (World Bank, IEA, OECD, ITUC), plus Stern (now a Lord and Professor since his last climate economics report was so well received by the UK Treasury and Government of the day).   This self-appointed group call themselves the “Global Commission on the Economy and Climate”, or “the Commission” for short.

Moreover, the Commission is backed-up by another expert elite group

They are backed-up by another expert elite group, “The Economic Advisory Panel”, comprising 9 professors (all economist and/or Nobel economic prize winners) and 6 other economic/finance experts (in all 2 women and 13 men).

The Committee, accountable to no one, is far from interest-free, biased as it is towards mainstream economics, international finance, business and trade

The Committee is clearly heavily biased towards mainstream economics, international finance, business and trade, and far from interest free. Stern himself has built a career based on the necessity of imposing ‘development’ seen as identical to economic growth. Of course, there is also a disclaimer that none of these people, or the organisations to which they belong, can be blamed for the report because none of them may actually agree with everything, but only “the general thrust of arguments”.

The names of the actual authors of the report do not appear anywhere in the document

Who from the GCEC actually wrote the report is not stated. However, the claim to being “independent” begs the question from what? The claim to “objectivity” is purely made to impress and persuade.

The Report’s arguments are “an apologia for the continuity of a capital accumulating political economy that reeks environmental destruction, mass dislocation of people and creation of urban poverty”

This is rather important given that the thrust of the report is not some disinterested search for knowledge, if such a thing were possible, which it is not, but rather a direct assault on the need for radical change in our political and economic systems in response to human induced climate change. The arguments presented are an apologia for the continuity of a capital accumulating political economy that reeks environmental destruction, mass dislocation of people and creation of urban poverty.

The essence of the Report is “to maintain business as usual in a structurally unchanged political economy of war, imperialism and exploitation”

The rhetoric is one of concern for climate change and the poor, but the essence is to maintain business as usual in a structurally unchanged political economy of war, imperialism and exploitation.

“This report is a lobbying document supporting what has come to be known as Green Growth”

So let me start by putting aside the scientific objective pretensions of “the Commission”, and make clear that this report is a lobbying document supporting what has come to be known as Green Growth, a wonderful oxymoron. That is, a new utopian vision of a growth economy to replace the old ones of sustainable development, welfare economy, and plain old growth economy. This is an economy that can accumulate capital while decreasing the amount of materials and energy used; an economy that can achieve social equity and the eradication of poverty without any redistribution policy; an economy where people are made happy by conspicuous consumption, competing to buy the latest gadgets and owning more (‘green’) stuff. Not to forget achieving harmony with nature through technology.

Report’s citations refer primarily to “greenwashing” sources

The Commission makes clear the analysis “rests on a considerable body of experience and research…as well as policy and business reports…work has drawn extensively from this body of applied economic learning” (GCEC 2014a p.16); the related citations are to Green Growth reports by the World Bank, OECD and UNEP. Further support comes from the Global Green Growth Institute, one of the eight institutional backers of the GCEC.

In this paper, I look at the New Climate Economy Synthesis Report as a key document aimed at influencing policy in the lead-up to the UN Framework Convention on Climate Change (UNFCCC) Paris COP meeting in December 2015. The synthesis is more important than the extensive online background chapters because of how it summaries and highlights key points while ignoring others. This is the document the policy community is expected to read, and probably many will just glance at its 10 bullet point strategy and executive summary. The hundreds of pages of report chapters, background material and annexes are for academics and technical experts to argue over. So from a public policy perspective the Synthesis Report, like the Intergovernmental Panel on Climate Change (IPCC) Summary for Policy Makers, is the central document of importance for political lobbying, non-experts, public marketing and media coverage.

 

CONCLUSIONS

Stern’s derogatory “reprehensible” remark is “his aggressive pre-emptive strike against anyone critical of the growth dogma”

According to Stern somebody who questions growth is “reprehensible”, and questioning the compatibility of growth with environmental quality is to enter a “pissing contest”. A pissing contest is a macho competition to see who can urinate the farthest or highest, and as a metaphor refers to a contest that is futile and purposeless. Of course there are plenty of such matches going on in economics all the time, probably due to an excessive number of alpha males in the profession and their obsession with self-aggrandizing, but otherwise pointless, mathematical modelling. Stern has engaged in his own schoolyard competitions over economic models and discounting. So perhaps there is no surprise in his aggressive pre-emptive strike against anyone critical of the growth dogma.

“The conflict of a growth economy with the environment is not going away just because an economic elite refuse to discuss it”

The debate over growth and who it benefits is far from pointless and to try to ridicule and close the discussion is the antithesis of democratic process, and I might add scientific rigour. A growth economy has been repeatedly highlighted as problematic by many economists, and others. The conflict of a growth economy with the environment is not going away just because an economic elite refuse to discuss it. From John Stuart Mill onwards great minds have been troubled by this system, its consequences, its inequity and yes its environmental exploitation and destruction. Some have sought alternatives, such as Mill’s steady-state economy. Keynes also wanted growth to end after a century. Perhaps the likes of Mill and Keynes are also to be regarded as “reprehensible” for suggesting the growth machine be turned-off?

The Report is framed so as to avoid the problem of the full reality of climate change

The structure of the current growth economy poses serious and on-going problems, many of which the Commission themselves discuss, but of course as market failures to be corrected at little or no net cost. The fact that the Commission is only looking at one environmental problem is also an indictment of any claim to be considering the real impacts of the growth society. They do not even address the full reality of climate change.

The whole new economy report is framed in a way that avoids the problem of climate change. The time horizon is less than 15 years, the policy goal is minimizing risk, the target is 2C, the aim is managerial control using metrics and models, the ethic is consequentialist and utilitarian, harm of the innocent is equated to lost output, and the core issue is reduced down to a market failure correctible by ‘getting the prices right’. This methodological reductionism is a standard mainstream economic approach (shared by the Stern et al. 2006 report), i.e. talking about the problems in grand terms and then reducing them down to something else, something that fits within a standard economists’ frame of thought. Strong uncertainty becomes weak risk assessment, cost shifting becomes externalities, Nature becomes capital, poverty becomes income level, intergenerational ethics become discounting, catastrophic disaster becomes a benefit of pollution control to trade-off with a cost. This report follows suite.

The Report does have limited merit

There are some extremely valid and important points in the report. The energy sector faces a major turn-over in physical capital stock that provides an opportunity for a change away from fossil fuel dependency. The economy does need serious restructuring and is in danger of continuing down a totally destructive path. However, the restructuring is not merely a matter of transition to more nuclear, gas, solar and wind rather than coal in electricity generation, or more electric and hybrid cars, or more subsidies for R&D, or more free trade to spread new technologies. If the authors really believe their own statements then the fossil fuel sector is dead, as their concern to save the value of toxic assets recognizes. Their numerous references to market failure, calls for government intervention and changing all the prices in the economy mean recognizing the need for planning.

What remains unrecognized in the Report is the need for new and accountable democratic institutions

That many governments are not trustworthy and are removed from accountability to the people is far from encouraging for a new phase of planning. However corporations are themselves undemocratic institutions and their promotion a threat to democracy. What goes unrecognized is the need for new and accountable democratic institutions and the role of civil society in representing the people against the vested interests of corporations. Instead the top down recommendations aim to empower corporations and a technocratic elite.

There is more left-out of this Report than put-in

There is so much that is left out, readily dismissed or just not discussed in this report. The oil industry, transportation besides new cars and buses, the EROI [Energy Returned on Energy Invested], the power of corporations, the contribution of industry to greenhouse gases, the impossibility of decoupling, the Jevons paradox, urban poverty driven by growth, other environmental problems created by growth, resource extraction, rare minerals, resource wars, the role of the military, the losers in the competitive race for more, the imperial mode of living, quality of life, and so on. There is in short more left-out than put-in.

Report is framed so as to hide the basic fact that sustained growth is incompatible with radical emission reductions

The earlier Stern review from 2006 was no different but did admit that sustained growth was not going to be compatible with radical emissions reductions. The new report by framing the debate in obtuse ways tries to hide this basic fact. The push for strong growth, competition and efficiency will increase the use of materials and energy, because, even if the economists’ claim to improving efficiency in such a system were realized, this does not address scale.

Report unintentionally highlights “the need for planning on a massive scale”

What the Commission unintentionally highlights in its synthesis report is the need for planning on a massive scale, in order to achieve transformation of the structure of the economy and its physical infrastructure. The need to address cities, their size and operation, transportation, land use and, what they do not discuss, the structure and functioning of the industrial sector. Energy is only one aspect of the problem and the Commission ignores both materials and the need for functioning ecosystems. What they also shy away from is the discussion of demand management. They tentatively talk of nudging people along. They propose changing all the prices in the economy but discuss this as if it were a minor issue of a simple tax. Taking social and environmental problems seriously means questioning what is produced, why, and who gets it.

It’s clear that the Report’s new climate economy aims to protect and preserve the existing economic development model

The basic issue to be addressed in all this is the human relationship to the biophysical world and the relationship of humans with each other. Development seen as an imperative to be achieved by exploitation of low entropy materials and energy purposefully creates a dependency culture both for society and the individual. What is necessary for transformation away from greenhouse gas emissions fundamentally questions the traditional development model and its concept of progress as material affluence. The new climate economy aims to protect and preserve that model and avoid any questioning of its validity.

The real concern of this report is corporate profits, capital accumulation, and a comfortable life for the rich

So what is the real concern in this report, climate change and the harm it poses to poor people and the planet or corporate profits, capital accumulation and a continued comfortable life for the global rich? Well, apparently the ultimate concern is the threat to the growth economy and that is what needs protecting above all else. As the report makes clear: “In the long term, if climate change is not tackled, growth itself will be at risk.” (p.9)

That’s right. It’s the growth economy and those who are dependent upon it that are at risk and need protection. Better growth, better climate for business.

REFERENCES CITED

Confino, Jo. 2014. ‘Lord Stern: Global warming may create billions of climate refugees’, Guardian, 22nd September, Guardian Sustainable Business.

GCEC. 2014a. ‘Better Growth Better Climate: The New Climate Economy Report; The Synthesis Report’. edited by Felipe Calderon et al. Washington, D.C.: The Global Commission on the Economy and Climate.

Stern, Nicholas Herbert, et al. 2006. ‘Stern Review on the Economics of Climate Change’. London: UK Government Economic Service.

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