Did the stimulus package jump-start the economy? Will climate regulation create jobs? Are clean energy subsidies an efficient way to curb pollution? Is health-care spending worth it? And how worried, really, should we be about budget deficits?
Those are questions for economists. With those issues in the news, economists are in demand. They’re quoted in the press, invited to conferences, even sought out at cocktail parties. But what, really, do they have to tell us?
Russ Roberts
“It’s a very funny time to be an economist,” says Russ Roberts, an economics professor at George Mason University and a research fellow at Stanford University’s Hoover Institution. “Our reputation isn’t very good. Probably shouldn’t be very good. We didn’t predict the recession. We don’t have a theory on how to get out. Yet people ask us for guidance. It’s bizarre.”
Russ is an unusual economist because he spends a good deal of time trying to explain his trade to a broad public. He hosts an excellent weekly podcast called EconTalk. He has written “an economic romance” called The Invisible Heart. He blogs at Café Hayek and, most recently, produced a rap video showdown between Frederick A. Hayek and John Maynard Keynes that has amassed an astonishing 500,000 (!!!) views on YouTube.
But when Russ spoke the other day during a day-long media colloquium at Hoover, where he was joined by John Taylor and Robert Hall, who are distinguished Stanford economists, he titled his talk: “Is Economics a Progressive Discipline?”
By progressive, he didn’t mean left of center. (Not at Hoover!) Instead, he was asking whether economics, like physics, evolves, to develop deeper or more precise knowledge about how the world works. “Do we make any progress?” he asked. His answer, in sum, was not much. Unlike physicists or mathematicians (or even, I daresay, climate scientists), economists today can’t agree on what would seem to be very fundamental questions. (more…)
Since 2004, when I wrote a story for FORTUNE called Money and Morals at GE , I have been an admirer of General Electric and its CEO, Jeff Immelt. My admiration deepened when GE unveiled EcoMagination, its effort to solve important environmental problems. Immelt and GE also led the U.S. Climate Action Partnership, an alliance of big business and big NGOs committed to getting the government to regulate greenhouse gas emissions.
Jeffrey Immelt
But–and you knew there’d be a but, didn’t you?–I’ve got a couple of questions about GE and Immelt that have been nagging at me. First, has GE become overly focused on Washington? Second, when will Immelt deliver for GE shareholders?
The first question was prompted by an aside in John Harwood’s column in The Times a week ago, about the Obama administration’s all-out effort to get Ben Bernanke confirmed as Fed chief. He wrote:
The investor Warren Buffett and Jeffrey R. Immelt, the chairman of General Electric, helped contact senators, a senior official said.
There’s nothing wrong with this, of course; Immelt has the right to ask senators to support Bernanke. But it reminded me that this registered Republican and his company have closely aligned their interests with the administration. Immelt serves on the president’s Economic Recovery Advisory Board. Newly-released figures show that among big companies or unions, GE was second only to Exxon Mobil in lobbying expenses during 2009, spending $21.4 million. (Other sources put the figure higher.) This isn’t a surprise–GE is a huge company (2009 revenues were $156 billion) and it has a myriad of Washington interests, including taxes, trade, energy policy and financial regulation.
But there’s more. GE’s Washington operation is a case study in Washington’s revolving door. Nancy Dorn, who runs the office, (more…)
So the verdict is in on the UN climate negotiations that just wrapped in Copenhagen and it’s all but unanimous:
Carl Pope, Sierra Club: The world’s nations have concluded a historic–if incomplete–agreement to begin tackling global warming. Tonight’s announcement is but a first step and much work remains to be done.
Frances Beinecke, Natural Resources Defense Council: We have taken a vital first step toward curbing climate change for the sake of our planet, our country and our children…. There’s still more work to be done.
Fred Krupp, Environmental Defense Fund: A lot of hard work remains, but a lot of hard work is finished. The new positive steps taken here…president the U.S Senate and President Obama with a n historic opportunity.
Jonathan Lash, World Resources Institute: “Much more is needed, but today marks a foundation for a global effort to fight climate change.
Elliot Diringer, Pew Center for Global Climate Change: The Copenhagen Accord is an important step forward in the international climate effort…it lays the foundation for a system to hold countries accountable. …Much remains to be negotiated.
Hmm.. I thought the 1992 Earth Summit in Rio or the 1997 Kyoto Protocol or the 2007 Bali Roadmap were first steps. Shouldn’t we be taking the second, third or fourth steps by now? Or, if you prefer the foundation metaphor, shouldn’t we hurry up and build the house, before sea levels rise and storms intensify?
This isn’t to suggest that the 15,000 or 20,000 people who descended on Copenhagen during the last two weeks wasted their time. What is being called the Copenhagen Accord sets a target of limiting global warming to a maximum 2 degrees Celsius over pre-industrial times. It promises billions of dollars of aid for poor countries. It points the way towards a resolution of the fundamental conflict between U.S. and China over their so-called “common but differentiated” responsibilities to deal with global warming. That’s important–when it comes to climate and the global economy, the G-2 of the U.S. and China tower over the rest of the world. The leaders of Europe, Japan and other countries at the summit were largely left to rubber-stamp the deal, as The Washington Post reported.
The trouble is, none of this is good enough. Nations can now set own emission reduction targets. (Earlier versions of a political agreement being discussed in Copenhagen had called for specific reductions by 2020 and 2050.) It does not set a deadline for signing and binding treaty. (Until fairly recently, that deadline was supposed to be now.) Sure, aid is promised to poor countries, but aside from some token amounts, no one can be sure where the money will come from.
This isn’t a strong deal. It isn’t a weak deal. It’s not a deal at all.
It’s a disaster waiting to happen.
Having said that, I understand the thinking behind the first-step-much-work-needs-to-be-done analysis coming from the inside the Beltway environmental groups. With the climate debate now shifting from Copenhagen to the U.S. Senate, they need to tread carefully. They can’t be overly critical of President Obama or undecided senators; they need to suggest that something real was accomplished in Copenhagen, to help persuade legislators that the U.S. can enact strong climate regulation without giving a competitive edge to China or India. Carl Pope of the Sierra Club made this argument explicitly, saying: “Now that the rest of the world–including countries like China and India–has made clear that it is willing to take action, the Senate must pass domestic legislation…”
But, again, the rest of the world has not committed to anything.
For a reality check on where we stand, let me refer you to the Climate Scoreboard put together by scientists at MIT, the Sustainability Institute and Ventana Partners, with the support of Nike, Citigroup, Fidelity Investments and others, which uses computer simulations to model the long-term climate impacts of decisions being undertaken today. Please see the Climate Interactive blog for more detail.
Put simply, we’re not going where we need to go.
A big part of the problem here, as Bill McKibben has written eloquently, is that the world’s governments treat climate change as just another political problem–and it’s not.
Think about the health-care agreement reached this weekend. It’s the product of a series of compromises, some of them quite ugly, but it has the support of President Obama and Democrats in Congress because they believe it’s the best they can do, for now. Maybe they’ll come back to “reform” health care again in a few years. It’s a step, even a big step, in the right direction.
This is how politics usually works. It’s incremental. Even on great moral issues like civil rights, governments move piece by piece–first the military was desegregated, then came schools, then voting rights, finally housing and employment bias were barred, if I remember my history right. This approach gives people time to get used to change. It’s the mindset behind first-step-much-work-needs-to-be-done.
But incrementalism isn’t going to do the job when it comes to climate change. Every day that goes by when we emit more global warming pollutants into the atmosphere than nature can take out, the job gets harder to do. So a small but inadequate step, even one in the right direction, can actually leave us worse off than before.
One metaphor that helped me understand this is a bathtub: The faucet (industry, transportation, deforestation) is pouring more water in to the tub than the drain (nature’s ability to absorb CO2) can take away, and there’s no way to make the drain any bigger. Just turning down the faucet a little doesn’t help; the water level in the tub can keep rising, albeit not as fast as before. The longer the faucet pours in more water than the drain can take away, the more radically we have to turn it down to stop the tub from overflowing.
McKibben explains it this way:
Physics has set an immutable bottom line on life as we know it on this planet. For two years now, we’ve been aware of just what that bottom line is: the NASA team headed by James Hansen gave it to us first. Any value for carbon dioxide (CO2) in the atmosphere greater than 350 parts per million is not compatible “with the planet on which civilization developed and to which life on earth is adapted.” That bottom line won’t change: above 350 and, sooner or later, the ice caps melt, sea levels rise, hydrological cycles are thrown off kilter, and so on.
And here’s the thing: physics doesn’t just impose a bottom line, it imposes a time limit. This is like no other challenge we face because every year we don’t deal with it, it gets much, much worse, and then, at a certain point, it becomes insoluble—because, for instance, thawing permafrost in the Arctic releases so much methane into the atmosphere that we’re never able to get back into the safe zone. Even if, at that point, the U.S. Congress and the Chinese Communist Party’s Central Committee were to ban all cars and power plants, it would be too late.
Oh, and the current level of CO2 in the atmosphere is already at 390 parts per million, even as the amount of methane in the atmosphere has been spiking in the last two years. In other words, we’re over the edge already. We’re no longer capable of “preventing” global warming, only (maybe) preventing it on such a large scale that it takes down all our civilizations.
There’s the argument for Flopenhagen.
As for Hopenhagen, well, I saw a lot of things to get excited about during my week in Copenhagen.
Denmark itself, for one: The nation gets 20% of its energy from wind, it’s rolling out a national system for charging all-electric cars and roughly 55% of the people of Copenhagen ride a bike every day, most to go to work. You won’t be surprised to hear that they are thinner as a group than those of us in the U.S.
Speaking of wind, Tulsi Tanti, the founder of Suzlon Energy, told me that China is the world’s biggest and fastest growing market for win energy. His company is manufacturing turbines in China, and he says the government there is committed in a serious way to clean energy — even if it doesn’t want to be held to absolute limits on emissions.
Finally, the kids. There were thousands of them in Copenhagen. They are committed to organizing to stop climate change, they are smart, they are idealistic, they are not pragmatic and they are not fans of the first-step-much-work-needs-to-done approach. For more, check out 350.org or Avaaz or the Youth Climate Movement.
You know how people say we need to save the earth for our kids? I’m starting to think that it’s the other way round, that they are going to have to save it for us.
That’s Muhtar Kent, the CEO of Coca-Cola, on the right. On the left is a polar bear. They got together about six weeks ago in Churchill, Manitoba, the polar bear capital of the world, where Kent traveled for a couple of reasons–to run with the Olympic torch as it made its way across the remotest parts of north Canada and to see first-hand the impact of climate change. No roads lead to Churchill, which is a port on Hudson Bay–you have to get there by plane or train. Another fun fact about Churchill–the newspaper there, the Hudson Bay Post, comes out once or a month, or less, depending on the news.
Anyway, I caught up with Muhtar Kent over the weekend in Copenhagen, where he was one of the very few Fortune 500 CEOs to show up in an effort to influence the climate negotiations unfolding here. Give him credit for that. (The only other CEO of a big U.S. company that I ran into here was Jim Rogers from Duke Energy.) Kent has spoken in favor of a global climate treaty and, more importantly, since becoming CEO of Coca-Cola last year, he has strongly supported the company’s sustainability initiatives–around climate, packaging and especially water.
Polar bears have been featured in Coca-Cola’s holiday advertising for nearly a century. Last month, Muhtar Kent, the company’s CEO, traveled to the Arctic to see the furry creatures up close.
It must have been cold up there, I remarked.
“Not cold enough,” replied Kent, who has emerged as a prominent corporate advocate for a global treaty to curb climate change.
“There were a lot of hungry polar bears waiting for the ice,” he said. “They were coming out of hibernation, they’d been on land for months, and they can’t feed unless they are on ice. The ice was late in forming, and we saw that with our own eyes.”
Kent sat down with Fortune in Copenhagen, where he spent the weekend. He was one of a handful of Fortune 500 CEOs to come to Denmark to throw his support behind a global agreement to regulate carbon emissions.
“It is absolutely imperative that our commitment to a low-carbon future be fully understood,” Kent said. “We’re here to lend a Coca-Cola voice to the public and political debate on getting to a fair framework, an inclusive framework, an effective framework so that we can achieve climate protection.”
We go on to talk about Coca-Cola’s sustainability work, which has a wide scope and is not cheap. The company has spent more than $50 million just researching climate-friendly refrigeration. You can read the rest of the story here.
In Amazonas, Brazil’s largest state, children and adults are going to school for the first time, families are paid $25 a month and startup businesses and community organizations are getting funded. The money comes from the state government and corporations including Marriott International, two Brazilian banks, Bradesco and Banco de Planeta, and Coca-Cola’s bottler in Brazil.
In return, the Amazon dwellers simply agree not to cut down trees.
This deal—in which companies and governments pay people who pledge not to destroy rainforests—is the essence of a concept known as REDD, which stands for Reducing Emissions from Deforestation and Degradation.
REDD is an important element of the UN climate negotiations unfolding this week here in Copenhagen, as well as a vital – and potentially controversial – plank of the climate bills pending in Congress.
“We will only win this deforestation battle if we can find ways to make the forest worth more standing that they are when cut down,” says Virgilio Viana, direct of Fundacao Amazonas Sustentavel, which oversees the project in the Juma Preserve of the Amazon. Juma is a 1.8 million acre region—about the size of Delaware—which is 98% forested. (more…)
Many thousands of people protested in Copenhagen yesterday and last night, demanding, among other things, climate justice. According to tcktcktck.org, which has a gallery of images, many thousands more held vigils areound the world. But what does climate justice mean?
To give you a flavor, here is a statement from an activist named Hemantha Withnage of Sri Lanka, who was speaking to a UN-backed group called the Subsidiary Body for Implementation, which oversees the Kyoto Protocol. I’m not going to comment other than to say that there is a yawning gap between the views expressed here and those heard in the halls of the United States Congress. And yet a global agreement to regulate climate will require an accord that, in some way, takes these views into account. Remember, China and India are seeking climate justice, too.
We are movements gathered under the Climate Justice Now! Network – many from the South, from developing countries. Thousands of our members are here in Copenhagen, joining thousands of other citizens in a historic march.
We are calling for Reparations for Climate Debt, the debt that is owed by northern countries, multinational corporations, and international financial institutions to the peoples and countries of the South. This debt is owed by the North for using up more than their fair share of the earth’s capacity to absorb greenhouse gases, and in the process depriving the peoples of the (more…)
General Motors Co. and Chrysler will reconsider decisions to close thousands of dealerships as part of a compromise meant to stave off federal legislation that would require them to keep the showrooms open.
…Rep. Christopher Van Hollen, D-Md., who has criticized the dealer cuts, said the GM and Chrysler plans “still fall short of what is needed to help reinstate profitable car dealers and put their employees back to work.”
Wonderful. My congressman will tell GM and Chrysler which dealers are profitable and which are not.
The Senate on Wednesday night agreed to bar the federal government from relying on the findings of an independent panel of health experts that recently recommended women should begin having routine mammograms at age 50 rather than at age 40.
Great. Who needs scientists when we have elected officials to decide what women need?
This story explained that the Congressional black caucus is holding up financial regulation reform its members want the administration to bring pressure on Goldman Sachs and GE Capital to renegotiate their loans with a troubled but well-connected radio company called Inner City Broadcasting:
In a rare break with President Obama, the caucus, made up of black members of Congress, is holding back support for the legislation because it wants the administration to help minority-owned businesses, including Inner City, whose financial plight has been specifically identified in meetings with top administration officials.
So while Republicans did favors for Halliburton, the Democrats twist arms on behalf of Inner City Broadcasting. Isn’t this what they call crony capitalism in Russia?
You have to say this about this Congress: They’re consistent.
“You can only compromise to a point before a solution isn’t really a solution.”
That, in a sentence, is about as succinct a critique of the cap-and-trade legislation pending in Congress as you are likely to read. For more, when you have 10 minutes, watch the video below from Annie Leonard, best known as the creator of The Story of Stuff. In language anyone can understand–it’s a cartoon, after all–she argues that a global cap-and-trade system to regulate greenhouse gases, which is what the upcoming Copenhagen climate talks are all about, won’t solve the problem of global warming.
She makes great points. Among them:
Giving away the permits to pollute under a cap-and-trade system is inequitable. As she puts it:
Industrial polluters will get the vast majo of these valuable permits for free. Free! The more they are polluting, they more they get. It’s like we’re thanking them for creating this problem in the first place.
The U.S. has a moral obligation to help poor countries which didn’t, after all, create the global-warming mess we’re in. As she says:
Don’t we have a responsibility to help those most harmed? It’s like we had a big party, didn’t invite our neighbors and then stuck them with the cleanup bill. It’s just not cool.
Carbon offsets are a risky business. She worries:
The danger with offsets is that it’s very hard to guarantee that real carbon is being removed to create the permit, yet these permits are worth real money, This creates a very dangerous incentive to create false offsets—to cheat. Now in some cases cheating isn’t the end of the world. In this case, it is.
Her solution? Cap emissions, let EPA regulate them, tax carbon, use the money for clean energy or to help poor countries adapt or mitigate their emissions.
In an ideal world, maybe. Her solution isn’t as simple as it sounds. Any effort by EPA to regulate emissions could be tied up in the courts for years.
In today’s world, forget it. As David Roberts points out in his acerbic critique-of-the-critique in Grist, the problems with cap-and-trade legislation as it is now written are a direct result of the power of the fossil fuel lobby. When Big Coal and Big Oil go toe-to-toe with Big Green, industry wins.
The fundamental problem we’re facing is that the environmental movement–even at its most mainstream– doesn’t have the clout to get a truly strong climate bill enacted. Getting even the current watered-down version enacted will be tough. Indeed, inside-the-Beltway BINGOs (big NGOS) worry so much about losing supporters that they are reluctant to engage in an honest conversation about climate change: That is, one that says we will likely have to sacrifice now–by paying higher prices for energy, subsidizing renewable power, and sharing clean tech with poor countries–to save the planet for future generations. Instead, they chant the mantra of “green jobs.”
One more thing to note about this video: Leonard says carbon trading will be run by the likes of Goldman Sachs and Enron, the people who gave us the dot-com bubble and the subprime mortgage crisis. (Somehow Bernie Madoff’s name comes up as well.) She doesn’t like markets or big business, clearly.
This isn’t an argument. It’s name-calling.
But because some people in corporate America have screwed up so badly lately, it is, unfortunately, effective name-calling.
That’s a problem for those of us who still believe that well-regulated markets–including a carbon market–can be part of the solution to global warming.
Your thoughts?
UPDATE: I rushed this blogpost into “print” yesterday because Annie Leonard’s video was sweeping through the green blogosphere and I was eager to join the conversation. In retrospect, I wouldn’t call her critique “devastating” in the headline. “Pointed” or “hard-hitting” would be better.
What’s more, while Leonard effectively highlights the flaws of cap-and-trade, the policy debate around whether it will work, whether it has worked in Europe, who will benefit, whether a carbon tax would be better, why offsets are essential to any cap-and-trade scheme (or not) is obviously much more complicated than any 10-minute video or 800-word blogposting can capture. (See the comments to David Roberts’ post if you like, for a useful discussion of these issues, with numerous links.) For what it’s worth, I believe cap-and-trade can be made to work despite its dizzying complexity and the risks of gaming the system–although I’d prefer to see a cap-and-dividend approach where the proceeds from auctioning permits are returned to consumers or even a revenue-neutral carbon tax.
Jeff Broin knows his way around a corn field. The 44-year-old CEO of Poet, which is the largest ethanol producer in the world, grew up in Minnesota on a family farm. He lives in Sioux Falls, South Dakota, and Poet’s 26 ethanol plants are scattered across the midwest.
Jeff Broin
Broin also knows his way around Washington, which he visits about once a month. Smart move. Without an array of subsidies and mandates from a farmer-friendly Congress, no one would invest in corn ethanol.
Which doesn’t mean that Broin is satisfied with the status quo–to the contrary, he’d like more help from the powers-that-be in your nation’s capital, which is where we met last week. We talked about the subsidies, about the challenge of competing with Big Oil and about Poet’s big plans to make cellulosic ethanol from corn cobs.
“While the corn cob is a very small item, it can have a very big impact,” Broin says. “We have the potential to replace gasoline in this country with ethanol.” (more…)
Not many heroes emerged from the rubble of the global financial meltdown. Two are Sheila Bair, the chair of the FDIC, and Brooksley Born, the former head of the CFTC.
Both warned of the crisis. Both were ignored.
In a June 2008 column—written before things got really bad—Steven Pearlstein of the Washington Post described Bair as
one regulator who refused to be muscled by an industry that appeared to be generating lots of new jobs and new wealth, who never bought into the notion that bureaucrats should not substitute their judgments for those of the marketplace, who understood the magnitude of the mortgage crisis.
Born, meanwhile, called for the regulation of derivatives that magnified the mortgage market collapse. Again, here’s The Post, from last May:
A little more than a decade ago, Born foresaw a financial cataclysm, accurately predicting that exotic investments known as over-the-counter derivatives could play a crucial role in a crisis much like the one now convulsing America. Her efforts to stop that from happening ran afoul of some of the most influential men in Washington, men with names like Greenspan and Levitt and Rubin and Summers — the same Larry Summers who is now a key economic adviser to President Obama.
She was the head of a tiny government agency who wanted to regulate the derivatives. They were the men who stopped her.
Sheila Bair
Last night, Bair and Born made a joint appearance as they were honored at the annual dinner of the National Women’s Law Center. (My wife Karen Schneider is v.p. of communications at the center, which explains my presence.) They were interviewed by Judy Woodruff of PBS, and it was revealing to hear them talk about what went wrong and what, if anything, we’ve learned.
Brooksley Born
Agencies like the FDIC and CFTC are part of the alphabet soup of Washington regulatory agencies that ordinarily get no attention from anyone other than the industries that they regulate. That’s one reason that virtually no one, other than industry insiders, their family or friends, paid much attention Bair or Born until it was too late. With the downturn in Washington journalism, which continues unabated, you can be sure almost no one will be watching those agencies or others like them in the future.
Bair had worked as an aide to Sen. Bob Dole, and then at the treasury department before becoming head of the FDIC in 2006. “I was just horrified by what I saw,” she said. Banks and individuals were wildly overleveraged. (more…)
So the verdict is in on the UN climate negotiations that just wrapped in Copenhagen and it’s all but unanimous:
In Amazonas, Brazil’s largest state, children and adults are going to school for the first time, families are paid $25 a month and startup businesses and community organizations are getting funded. The money comes from the state government and corporations including Marriott International, two Brazilian banks, Bradesco and Banco de Planeta, and Coca-Cola’s bottler in Brazil.
Many thousands of people protested in Copenhagen yesterday and last night, demanding, among other things, climate justice. According to tcktcktck.org, which has a 
From the AP: 
