This Thursday NSSR PhD student Julia Puaschunder gave the oikos lunch presentation with a talk called “Intergenerational Justice: Climate Change Burden Sharing,” which suggested the possibility of using bonds to fund mitigation and adaptation costs of climate change.
If we take as a given a trade-off between sustainability and growth, the problem of climate change can be presented as a zero-sum game to be played with our children: We may expend the earth now and leave our children with nothing, or we may bolt for asceticism and leave our children a plenitude.
The Grass is Always Greener
What should we do? From a microeconomic standpoint, it wouldn’t be hard to set up our game theory square, pick our Nash equilibrium, and snuggle soundly into the best of all possible scorched earths.
However, not even economists can get away with being that obtuse. Accordingly, Julia shifted the framework from one of self-interested agents to one of intergenerational caring. As all human society contains some relevant dictums – care for children, care for elderly – so modern society can extend the intergenerational compact to include the little unborn ones. But this wouldn’t be a one-way street: just as we leave our future-babies with grass to crawl on, so too must they pay off the loans we incur in switching to a growth regime that could permit said grass to grow.
Consisting of the reasonableness of intergenerational caring, the scientific fact of impending climate change, and the economic trade-off between sustainability and growth, this framework leaves us with the more-or-less abject desirability of climate bonds as a means to split the costs of handling climate change between generations.
The Political Economy of Global Catastrophe
However, following the presentation, I had a strong ambivalence towards climate bonds as a potential tool to finance green policies. They seemed potentially efficacious politically, but I had a number of issues both with climate bonds as an instrument and with Julia’s framework in the presentation.
First, I am extremely skeptical of the justness of the redistributions that would occur following an implementation of climate bonds. Climate bonds would effectively increase the long-term interest rate, thereby shifting wealth from the poor to the wealthy. Wealthy people with more savings could buy more climate bonds, which would have to promise returns high enough to incentivize their purchase.
This would effect a redistribution to those who have already benefited most from the lack of environmental protections currently and historically in place. If climate bonds can quickly solve the political question of how to fund climate change, it can only do this by rewarding those who have already contributed the most to global pollution.
Second, I was concerned that Julia accepted the common assertion that there is a trade-off between sustainability and growth at face value. I am extremely skeptical that there is such a trade-off. Currently we have a fossil-fuel-powered economy, so of course there is a strong correlation. Indeed, when you run the regression, you can see the near 1:1 correlation between growth of economies and of carbon!
However, with our “jobless recovery,” our “gig economy,” our underemployed precariat clamoring for something more to do, we could easily imagine employing half our uber drivers building subways, employing half our baristas as composters, and half our digital content personalizers (what do we call the people who spy on you through facebook?) designing wind turbines or researching green technologies. Not only are the jobs better – increasing wages, consumption, and growth – but they can succeed in decoupling economic from greenhouse gas growth. Indeed, economists such as Robert Pollin have put forth full plans on how to create economic growth by “greening the global economy.”
Following these is the broader political-economic point: Julia takes the current generation and future generations as the two parties under consideration, but within these generations are different classes, countries, and regions with disparate interests. Climate bonds may solve a class-political impasse by bribing wealthy people to not kill everyone, but to treat the issue of climate change as a matter of smoothing consumption between generations ignores the range of interests that exist within generations.
Standing Together, Against Whom?
Thinking in this political-economic vein, I remembered political theorist Timothy Mitchell’s excellent book Carbon Democracy which documents how the shift from coal to oil was a decision pursued by political elites with the express intention of circumventing the democratizing outcomes of workers organizing along the lines of coal production.
I would guess most forms of green energy would likely have more in common with coal than oil from a logistical standpoint. Following Mitchell’s argument, this would mean a sustainable energy regime may lend itself to easier union organization and greater working-class strength than an oil-based regime. Supplemented with a Kaleckian class-political frame, it is easy to imagine that those who oppose sustainability policies do so less because these would depress growth and more because they would accelerate it.
Fellow MA student Patrick Zeitinger suggested additional potential political and distributional problematics of climate bonds. When do climate bonds fund adaptation as opposed to mitigation? And where do they fund what?
It is easy to imagine developed countries getting the mitigation and the global South getting the adaptation. Over time, the South would become more and more reliant on Northern technologies, more and more dependent on expertise developed in the ex-imperial powers in order to implement green technologies. The South could be stuck paying the North for sustainable technologies that were developed with the aid of global money. In such arrangements, imperialist dynamics would be perpetuated under the aegis of environmentalism.
My sense is still that climate bonds are an innovative and potentially very valuable tool to aid the fight against catastrophic climate change. However, an apolitical framework opens the door to perverse distributional outcomes and a misunderstanding of the nature of the problem, which is not a matter of consumption smoothing but of class struggle.
The oil executive with a luxury disaster shelter and the Haitian-American Uber driver do not stand to lose from climate change together. If the family of the first benefits from climate change and climate bonds alike, that of the other stands to lose more from the former, less from the latter. In this respect, climate bonds constitute a Pareto gain. But Pareto, as generally, is beside the point.