Politics of low carbon industrial strategy: how to make reforms

politically sustainableRobert H. Wade

LSE19 February 2015

Industrial policy & CC

• Challenge of curbing & adapting to CC takes industrial policy debate to whole new level.

• => transformation of whole economies (>> Polanyi’s Great Transformation): “green growth” techno-econ paradigm

• => end of dominance of neoliberal “market failure theory” of govt intervention

• But, dominant view in most DCs: “CC is a luxury good”

Trends in planetary ecosystem

• Conclusion: trends in CO2, temperature (atmospheric, sea), energy-intensity of economic growth in wrong direction

Absolute decoupling?

• “Absolute decoupling” of CO2 emissions from GDP growth is not occurring

• Tim Jackson, Prosperity Without Growth: Economics for a Finite Planet, 2009

• Figure 5.3: Trends in fossil fuel consumption & related CO2, 1980-2007

“Paradox of CC Inaction” (esp implementation)

• (1) Near-consensus among climate scientists: • CC real • poses acute dangers to human civilization &

planetary ecosystem; it is probably biggest challenge our global society faces

• caused in large part by human activities (esp fossil fuels, livestock)

“CC inaction paradox” (ctd)

• (2) But public & politicians not prepared undertake costly actions now (eg “sacrifice economic growth”), b/c CC not clearly visible & acute now.

• (3) By time CC is visible & acute, too late to stop catastrophic consequences – unless a stroke of Luck. (A. Giddens, The Politics of Climate Change, 2009)

• Remember frog in pot of gently heating water!

“Stay in jail” card

• Likely necessary condition for avoiding exceeding 2 C “safe” threshold increase: stranded fossil fuel reserves & unproductive fossil fuel infrastructure.

• Christophe McGlade & Paul Ekins, in Nature: 1/3 of global oil reserves, ½ gas reserves, 4/5 of

coal reserves must remain in the ground (= “unburnable”) (C.McGlade and P.Ekins, http://www.nature.com/nature/journal/v517/n7533/full/nature14016.html)

If not, “stay in jail”.

Pessimism reigns

• Daniel Kahneman: “I am deeply pessimistic [on action to reduce CC]. I see no path to success”

• (quoted in G. Marshall, “Think about it – how our brains are wired to ignore climate change”, Guardian 24 Sep 2014, p.39)

• Lance Taylor & Duncan Foley: “If serious mitigation is not implemented soon [at a level exceeding one percent of world GDP], prospects for the world economy are dismal”

Grounds for optimism?

• Nuclear fusion = “get out of jail free” card. Good news: US, EU, SK, now China. But …

• Electricity storage + renewables: “firm that cracks battery storage will be Microsoft of 21 C” (big storage – power stations, small storage – cars)

Peretz-ian optimism: “green growth here we come”

• 5 discontinuous techno-econ paradigms over past 2 centuries, all pushed by cheap fossil fuels: (1) canals + factories; (2) coal, steam, r’ways “Victorian middle class living”; (3) steel & heavy engineering transoceanic & continental trade Belle Epoche lifestyle; (4) oil, auto, electricity, plastics, mass production “American way of life”; (5) ICT & flexible prodn, starting 1970s

Peretz T-E paradigms

• Each wave rides on cheap new basic input which raises productivity potential across many sectors :

• A. Diffusion half, led by finance & free market ideology forcing triumph of the new; but finance overinvests in the new bubble Crash. Roaring Twenties, 1990s-2000s

• B. Deployment half, led by producers & State.Victorian boom, Belle Epoque, post-WW2

Our current T-E paradigm

• ICT + flex prodn revolution began to diffuse fast in 1980s (rise of finance, neoliberalism).

• Crashes of 2000 & 2008 mark turning point towards deployment stage, which has 20-30 more years to run.

• Govt policies & regulations can have major effect on “direction” of deployment.

• They can be tailored to move processes, products, & demand in direction of “green growth”, with low energy- & materials-intensity

Peretz conclusion

• ICT + flex production have potential of achieving green growth & sustainable lifestyles across the planet, provided govts & businesses collaborate around this project, beyond neoliberalism.

• But, she stops here, at “Vision” of what is feasible.• What about “Execution”?• Thomas Eddison: “Vision without Execution is

Hallucination”

Execution of low carbon vision

• Going from “what we should do” to results on the ground requires:

• (1) legislation: objectives; new organizations with law, finances, personnel; role of parliament

• (2) the legislated change in institutions must be implemented “durably”

• (3) there must be “positive policy feedbacks” which prevent policy backsliding: eg public opinion; new vested interests in business; NGOs

Durability of reform (once enacted)

• Public policy literature gives too much attention to adoption, not enough to implementation/sustainability/durability

Mechanisms of durable reforms

• Welfare state: its introduction created new constituency with favorable preferences

• Thatcher/Reagan liberalizing reforms: weakened cohesion of potential opponents

• MPC of BoE: its creation went with dismantling of authority within Treasury which had earlier carried out same functions

UK Climate Change Act (CCA), 2008

• UK CCA = world’s first Climate Change Act • “Britain leads the world in combating CC!”• PM Blair: “revolutionary step”• Guardian editorial: “revolution in slow

motion”• All parties, CBI, TUC, many NGOs supported its

passage

Question: how durable has it been?

• Answer: not very

Build-up to the CC Act

• UK Labor govt, 2000, legislated various schemes to cut emissions.

• Clear by 2005 not effective• Friends of Earth launched The Big Ask campaign

to get high-powered CC legislation. • Civil society groups on board, CBI, TUC, all

political parties, nuclear industry. Polls said public supported.

• Parliament approved CCA, Nov 2008, world’s first Climate Change Act. (M. Lockwood, 2013, “The political sustainability of the 2008 Climate Change Act”, IGov, EPG working paper: 1302.)

CCA: features

• (1) Aim to lock GHG reduction targets in through legal means, binding on current & future govts; including 80% cut in 1990 levels by 2050

• (2) Independent CC Cttee (CCC), mandated to recommend 5 yearly carbon budgets (starting 12 years in future). Cttee of 8 technocrats (chosen by Department of Energy & CC) + secretariate of 30

CCA: features

• (3) Govt required to propose policies to meet CCC targets. CCC to report annually to Parliament

• (4) New Department of Energy & CC (DECC)• (5) Umbrella for other policies & laws

CCA rationale & mechanism

• Rationale: Bind future govts to emission reduction targets, & thereby give investors confidence to invest in low carbon technologies & infrastructure

• Mechanism: (1) CCA puts govt & Parliament under series of duties, actions, reports, to create transparency, accountability & pol pressure. (2) The engaged public supports. (3) “Reform winners” support. (4) Provision for “judicial review”.

Effects of CCA?• Within 4 years (by 2012) CCA not inspired much

confidence in investors. Current govt’s commitment to future targets very uncertain. Govt in-fighting results in undermining of own carbon targets.

• Expansion in gas-fired capacity 3 times renewables capacity

• Uncertainty raises cost of debt for renewable energy projects by 15% (2012). (http://greenallianceblog.org.uk/2012/11/16/whats-going-wrong-with-politics-and-energy-and-how-to-fix-it/

• World Wildlife Fund: govt allowing CCA to “wither by neglect”

Why? Change in institutions? CCC • CCC presents itself as akin to MPC of BoE.

Misleading.• MPC given inflation target by govt, then

responsible for using its several instruments• CCC recommends targets to govt, govt then

implements (or not). CCC no binding powers; it monitors govt, reports to Parliament

• CCA calls targets “legally binding”. But no enforcement mechanism, except that minister must explain why targets not met. “Judicial review” toothless

Change in institutions? DECC

• On plus side, DECC has taken energy policy away from old Energy Dept (wh focused on “competitiveness”).

• But, DECC tightly circumscribed: little influence over:

• (a) other depts with policy-making powers in relevant areas, (b) Treasury, (c ) EC

• DECC minister is Liberal-Democrat, junior partner

Positive feedback from public? No

• Eg 2008: 60% of UK “strongly agree” or “agree” that “many scientific experts still question if humans are contributing to climate change”

• 77% “strongly agree” or “agree” that “most people are not prepared to make big sacrifices” to help stop climate change (Giddens, Politics,

p.103)

Positive feedback fr public?

• Lower % rated CC as priority in 2011 than in 1997, despite IPCC, international conferences, pol leaders, NGOs, hurricanes, floods.

• Throughout, % who rate CC as priority for public policy in single digits. “Environment” hardly mentioned in 2010 election campaign. (Matthew Lockwood, 2013, “The political sustainability of the 2008 Climate Change Act”, IGov, EPG working paper: 1302, on which I have drawn extensively.)

Most important & other important issues facing Britain today: 1997-2011

Why little positive feedback from public?

• CC different from earlier generation of localized air & water pollution, which drove env mvts & legislation. GHG odorless & colorless.

• “Our cuts benefit others” : DCs & future generations.

• “Our cuts cost us” : eg “green taxes” on energy bills (scare stories in right-wing media)

• Co-benefits: energy security, econ growth, new jobs, health? Public does not count them

Other reasons for little positive public feedback

• Sceptics/denialists good access to media, because of rule of media “balance”

• Sub-group of sceptics/denialists have waged well-organized, well-funded “campaigns of doubt”

• Most of Republican party = loyal servant of fossil-fuel lobby.

• UK Conservative MPs: 1/3 doubt man-made CC (2008).

Positive feedback from specific groups? Not much

• NGOs: Has CCA helped campaign groups (eg FoE) to sustain focus on implementation of CCA? Only marginally, b/c campaign groups hostage to issue-attention cycle, must keep moving to new (rising) issues. Also, Great Recession deflated public support for “environment” NGOs.

• Business: Split. Some support groups like Climate Group, Corporate Leaders Group on CC. Others (esp energy-intensive) seek exemption from climate policy or softer targets: “competitiveness”.

Positive feedback from “reform winners”? Not much

• Investors in low-carbon electricity: Theory of CCA: they were expected to constitute new “vested interests” to counter vested interests in fossil-fuels

• In practice, open conflict within govt coalition on gas vs. renewables, gas has tended to win.

• Expansion of gas capacity >> renewables capacity since 2008

• This strengthens vested interests opposed to carbon policies which would “strand” these fossil-fuel assets.

What is achievement of CCA/CCC?

• In face of strong push-back against GHG reduction measures (“costs”, “competitiveness”, “risks of unilateral action”), CCA/CCC/DECC, long term targets, and reporting requirements on govt & Parliament have slowed down the dilution of CC action.

Why not more durable?

• (1) Limited institutional transformation. • (a) targets not enforceable; (b) CCC & DECC have

limited powers vis-à-vis existing depts; (c ) CCC must weight “fuel poverty” & “ competitiveness” in setting targets

• (2) Constituencies: Limited positive feedback effects (eg “green jobs”); strong negative feedback effects (eg “green taxes”, fossil-fuel opposition, investor uncertainty due to political disagreements).

• (3) Gas-fired electricity is low-risk option

Conclusions

• (1) IP debate must take low carbon issue as central• (2) Peretz optimism rests on extrapolating from

earlier T-E paradigm shifts to perceive emerging “green growth” T-E paradigm. But, CC imposes global constraints, requires inter-state cooperation, publics not supportive

• Peretz correct: To make progress on CC, have to entice public & policy makers by making it attractive to them (eg co-benefits), not just rely on “fear of Catastrophe”.

Conclusions (ctd)

• (3) Fate of UK CCA 2008 is cautionary tale • (4) 2014 saw upsurge of CC legislation/policies

(eg US-China). Is this “global climate awakening”? Don’t take legislation & policies at face value. Distinguish Vision & Execution. Execution requires real institutional changes + net positive feedback

• (5) Analysis of UK CCA execution can be applied to other IP cases

END

Overarching challenge• To make progress on CC, have to entice public & policy

makers by making it attractive to them, not just rely on “fear of Catastrophe”. Major changes in how we live do not happen by fear or rationality but by desire & aspiration (or war). How to entice?

• (1) Widen goal from “avoid or adapt to CC” to: promote “green growth”.

• (2) Shift vision of “good life” from energy- & materials-intensive consumption, to more service-intensive ways of achieving well-being (eg rental economy for durable goods).

• (3) Establish wide-ranging & coherent policies to create synergies in innovation & investment. Stop incentives for labor-saving innovation, boost incentives for energy- & materials-saving innovation.

Outline

• 1. Trends in planetary ecosystem: CC is real! • 2. “Paradox of CC inaction”• 3. Why not more progress towards

decarbonization? Several reasons, beginning with low “salience” of CC in public opinion.

• 4. “Progress” is function not only of policy “adoption” , but also “implementation”. What factors make for durable reform? Case of UK Climate Change Act (CCA) 2008

Govt efforts underway since 1980s• UK: Thatcher, 1988, speech to Conservative

Party confc, stressed CC as problem. UK Parliament, 1994, proposed voluntary emission reduction targets. Toughened early 2000s. Climate Change Act 2008

• IPCC 1988 (under UN). 5 assessment reports since 1990. AR5 2014, 800+ contributors.

• International conferences: 1992, Rio Earth Summit, UNFCCC (196 parties, 2014); COPs, annually since 1995; 1997, Kyoto; 2009, Copenhagen; 2010, Cancun; 2014, COP20, Lima

Why not more progress?

• Common explanations:• (1) “lack of political will” on part of political

leaders• (2) vested industrial interests (eg fossil fuels)• Truth in both, but superficial. Downplay • (3) public opinion – CC “low salience”• (4) CC legislation lacks (a) institutional

buttressing & (b) positive policy feedback

Public opinion

• Salience: For issue to get sustained political momentum, substantial majority must say it is up near top of their concerns, relative to other issues ( = “highly salient”); & must remain salient over time.

• Cf Anthony Downs: the “issue-attention cycle” (1972)

Polling evidence: US• US: 2009: two thirds of Americans “disagree”

or “don’t know” in response to: “Global warming is a fact & is mostly caused by emissions from vehicles & industrial facilities” (Angus Reid poll, Oreskes & Conway, “Defeating the merchants of doubt”, Nature, 465, 686-87, 10 June 2010).

Lessons from durable reforms

• (1) New institutions (laws, orgns, finances) needed to govern the policy area; some existing competing institutions dismantled

• (2) New policy/institutions must build clientele of supporters (“reform winners”), weaken “reform losers”. Then, positive policy feedback makes it difficult for politicians & “reform losers” to roll back Patashnik, E. (2008) Reforms at Risk: What

happens after major policy changes are enacted Princeton NJ, Princeton University Press

Newspaper coverage, & salience of CC/env: UK, 2000-11

CC in public opinion: “back of the mind”

• UK: Even at height of CC concern in 2006-07, most people ranked CC well below: crime, immigration, NHS, jobs, “the economy”, inflation. Crash of 2008 & Grt Recession further eclipsed.

• Lower % rated CC as priority in 2011 than in 1997, despite IPCC, international conferences, pol leaders, NGOs, hurricanes, floods.

• Throughout, single digits. “Environment” hardly mentioned in 2010 election campaign. (Matthew Lockwood, 2013, “The political sustainability of the 2008 Climate Change Act”, IGov, EPG working paper: 1302, on which I have drawn extensively.)

% respondents citing issue as most important facing Britain today: 2010

Why CC not more salient? Nature of CC problem benefits obscure

• CC different from earlier generation of localized air & water pollution, which drove env mvts & legislation.

• GHG odorless & colorless. • Benefits of “our” cuts accrue to others: (1)

people in DCs, (2) people in future. • Costs accrue to us energy consumers. • Difficult to generate positive mass feedbacks

Costs of curbing CC not obscure

• Politicians worry that voters do pay attention to costs of CC policies; esp higher energy prices (eg cars, aviation) & env taxes.

• Eg UK voters: (1) 60+ % hostile to higher taxes on motoring; several fuel duty mass protests. (2) Large majority support public support for renewables. But only 1/3 say they would pay even a penny more for renewable energy

• Therefore politicians say: “CC is bad politics”

Organization of sceptics/ denialists

• (1) Fossil-fuel producers are well organized, & major donors to candidates, parties, & election campaigns, esp in USA

• (2) Entire Republican Party = loyal servant of fossil-fuel interests

Orgn of sceptics (ctd)

• (3) Small # of sceptics have excellent access to media, disproportionate to numbers. Why?

• Sceptics have manufactured a “debate” about CC with two sides, obliging media to present “both sides” in name of “balance”.

• CF media must balance those who believe Earth around Sun with those who believe Sun around Earth

Organization of sceptics (ctd)

• (4) Doubt campaigns:• Public unmoved, confused & rejectionist b/c

people & orgns have waged organized “campaigns of doubt” against climate science.

• N. Oreskes & E. Conway, Merchants of Doubt, Bloomsbury: NY, 2010

Doubt campaigns (ctd)

• GW is only latest of long line of “doubt campaigns” to keep problems off public policy agenda.

• (1) 1950s -- 1980s: cigarettes cancer • (2) 1970s -- 1980s: man-made pollution

acid rain & ozone hole • (3) 2000s: pesticide DDT harm to humans,

bald eagle, etc. Campaign argued govt shd not have banned DDT

Premise of doubt campaigns:

• Campaigns focus on getting public & politicians to reject scientific evidence that threatens ideology or profits.

• Mantra: “the science is too uncertain to justify public policy”.

• Mantra works, b/c if people think the science is contentious, they are unlikely to support public policies that rely on that science

“Doubt is our product”

• Playbook written by R.J. Reynolds: “Doubt is our product, since it is the best means of competing with the ‘body of fact’ that exists in the minds of the general public” (senior tobacco industry executive, memo, 1969, quoted Oreskes & Conway, Merchants, p.34)

Organization of doubt campaigns• In US, network of conservative & Libertarian think-

tanks: EG Cato Institute, Heritage Foundation, American Enterprise Institute, Competitive Enterprise Institute, Heartland Institute, Marshall Institute

• They are anti-government, anti-regulation, pro “free market”.

• Anti “liberal environmentalists” = “internal enemy” = “watermelons: green outside, red inside”.

• See CC as scam, hoax to justify more “government intervention”

Current “climate awakening”?

• 2014 – “climate awakening” around world: many countries passed CC legislation, China-US deal

• But distinguish b/w policy adoption & sustained implementation

• Trajectory of UK CCA helps identify factors that produce more, or less, durability of policy change

Argument so far

• Why little progress in stopping CC?• Public concerned about CC but in “back of

mind” way. CC has low salience: comes far down public’s list of “very important” issues

• Why (despite scientific evidence)? • (1) Nature of CC problem: benefits of action

obscure; costs of action visible• (2) Organization of sceptics excellent media

& political access

“Climategate”, 2009-12

• Online release of emails from climate scientists at University of E Anglia in UK, in 2009, just before Copenhagen conference, turned into media event, “Climategate”.

• Investigations showed charges almost completely baseless.

• Polls showed that event precipitated doubts about reality of GW in large swathes of US & UK populations