Cooler Elites - a story of accommodation to the bourgeoisie
The Nation - May 7, 2007 http://www.thenation.com/doc/20070507/henwood
Cooler Elites by DOUG HENWOOD
When the rich and powerful gathered for their annual meeting at Davos =
in January, at the World Economic Forum, climate change was on their =
collective minds. Signs reading Make Green Pay served as a backdrop =
for the usual panels, featuring CEOs and high-end pundits holding =
forth on global finance and the terrorist threat. And, participants =
say, global warming was the number-one topic amid the shmoozing, =
where the real business of the retreat is conducted.
There’s some good news here. Given the risk that a climate =
catastrophe could hit soon and suddenly, we’ve got to make some =
dramatic changes very quickly. What CEOs and portfolio managers think =
and do is an urgent question; we may not have time for mass movements =
to develop and force elites to do the right thing. They’ve got to get =
started now, or all could be doomed.
But you’ve got to wonder how serious they are about doing something. =
Chris Giles, economics editor of the Financial Times, said at Davos =
that there’s no evidence that CEOs and Cabinet ministers were about =
to make “tough decisions” to avert catastrophe.
Had I been invited to Davos, I could have earned an I Am Offset pin =
by paying a mere $93 to “offset” a New York to Zurich round-trip =
flight–a journey that produces more than six tons of carbon =
emissions. About 60 percent of attendees performed this act of =
penance, though as A.C. Thompson and Duane Moles show in this issue, =
carbon offsets are a pretty dubious business. The more serious =
question–is Davos-style jet-setting sustainable?–wasn’t likely to =
come up when consciences were assuaged by the offsets.
But maybe this is too negative. Let’s savor the spreading climate =
consciousness among the corporate elite. Amazingly, the CEOs of the =
Big Three US auto companies and Toyota appeared before a =
Congressional committee in mid-March to endorse limits on carbon =
emissions–and they failed to rise to the bait when a Republican =
panel member, Joe Barton, characterized the human contribution to =
greenhouse gas emissions as “trivial.” Even ExxonMobil, the most =
recalcitrant of the oil companies, has a statement of concern on its =
website. When the auto and oil industries feel they have to talk the =
climate change talk, then something is happening.
A milestone in the evolution of elite opinion was last October’s =
publication by the British government of the Stern Review, an =
overview of the economics of climate change, named after former World =
Bank chief economist Nicholas Stern. While many have (rightly) =
criticized the review for its excessive caution, its political =
contribution shouldn’t be underestimated: It promoted the idea in =
elite discourse that there would be substantial economic costs to =
doing nothing about climate change. As Stern showed, it’s not good =
for the GDP when crops fail, storms intensify, pandemics spread and =
coastal cities flood.
Another milestone was the creation in January of the US Climate =
Action Partnership (USCAP). Among the players are such noted friends =
of the earth as GE, DuPont, PG&E, Caterpillar and BP (which tries to =
be the greenest of the oil companies but is still an oil company, and =
one with a terrible worker-safety record at that). Joining those =
firms are some of the most business-friendly environmental =
organizations, like Environmental Defense (ED) and the Natural =
Resources Defense Council (NRDC). While USCAP’s manifesto calls for =
relatively modest reductions in greenhouse gas emissions, and seems =
in no hurry to get there, it is remarkable to see such blue-chip =
corporate names signing on to any kind of green program, even if it =
is a rather pale shade of green.
And then in late March yet another group formed, Investors and =
Business for US Climate Action, a coalition of institutional =
investors (including not only union and public-sector pension funds =
but also big private-sector names like Merrill Lynch), foundations =
and businesses. Among their founding documents was a letter to George =
W., urging him to take serious action on the climate and asking for a =
meeting.
All that’s not to say the denialists have gone into hiding, and it’s =
no surprise that the dead-enders at the Wall Street Journal editorial =
page are leading the resistance. The creation of USCAP was greeted by =
the Journal’s Kimberley Strassel with a real screamer of a piece, =
denouncing the “jolly green giants” for secretly wanting to make =
money on carbon reduction while appearing high-minded in public. True =
enough, but Strassel won’t cut them an inch of slack: “At least when =
Big Pharma self-interestedly asks for fewer regulations, the economy =
benefits.” Reducing greenhouse gas emissions, in WSJ-land, has no =
upside at all.
Aside from overt denialists, there are some important players who are =
MIA, such as the insurance industry. Back in the early 1990s, I =
attended a conference co-sponsored by that industry and Greenpeace. =
Greenpeace wanted to prod insurers into countering the weight of the =
denialist auto and oil industries. After all, the insurance companies =
will have to pay out larger claims as hurricanes and floods get more =
severe. At the time, their European counterparts, especially the =
reinsurance industry (which insures the insurance companies), worried =
aloud.
But the US insurance industry would hear none of it; it was =
interested only in tighter building codes, better computer modeling =
and inventing new financial instruments. Though they were too =
discreet to say it openly, their plan for climate change was either =
to jack up premiums or to stop writing new policies–thus Allstate =
has largely pulled out of Long Island.
early fifteen years later, little has changed. The US insurance =
industry is mainly concerned with technicalities, while the Europeans =
sound alarms. A 2006 paper from the Insurance Information Institute =
emphasizes scientific uncertainty about the relation between climate =
change and storm frequency and severity, notes that there’s no simple =
relation between storms and industry profitability, comforts readers =
with praise of the industry’s “resilience”–and reminds them that =
they can always jack up premiums in dangerous areas (”where places, =
things, and people are expensive to insure, insurance will be =
expensive”).
By contrast, Swiss Re, the reinsurance giant, opened a 2002 paper on =
the topic by noting the necessity “to prevent global warming from =
accelerating to such [a] degree that humans are no longer able to =
adjust themselves in time,” which they identified as “a task for =
governments and the community of states.” A former consultant to the =
US insurance industry, who quit in disgust, told me that European =
insurers are “run by smart people who care about science” whose =
governments have been prodding them into action, while their American =
counterparts are “bottom-line hacks” whose government has been just =
fine with their indifference.
The Wall Street Journal editorialists have a point when they say that =
the corporate members of USCAP are better-positioned than their peers =
to make money from greenhouse gas reduction. GE, for example, which =
is busily touting its “Ecomagination” program, is poised to sell =
“clean coal” products, solar panels and even nuclear power plants. =
But short of a revolution, there’s no imaginable way to reduce =
greenhouse gas emissions unless someone can make money off it.
It’s painful for someone like me, who instinctively gravitates to the =
more radical position on most issues, to admit that the “better deal =
for business” is still a lot better than nothing. But it’s worth =
examining the problems with their proposals, with the hope of =
agitating for something better. There’s the simple point that Stern’s =
and USCAP’s emissions targets aren’t ambitious enough. But there are =
also problems with their favorite strategy: cap-and-trade schemes.
These work by setting maximum emissions for polluting entities, be =
they individual factories or power plants or entire countries, based =
on historical baselines; these limits decline over time. Entities =
that come in under the limits are free to sell their remaining =
emissions rights to entities that can’t make the limits. An early =
version of cap-and-trade was the 1990 domestic US agreement to limit =
acid-rain-causing sulfur dioxide emissions by coal-burning electric =
utilities. Cap-and-trade was at the core of the Kyoto Protocol: =
Individual countries were capped and then free to sell their credits, =
and countries themselves were expected to develop cap-and-trade =
systems for their own polluters. Despite US rejection of Kyoto, the =
European Union established a cap-and-trade system to meet its =
obligations under the protocol.
The record of these models is mixed: The acid-rain-reduction =
agreement is seen as fairly successful; sulfur dioxide emissions are =
more than a third below what they would have been without the =
program. But SO2 emissions are mostly limited to power plants; by =
contrast, greenhouse gases come from millions of sources, from =
factories to lawn mowers, a more daunting administrative task.
The EU carbon scheme has had a less auspicious history. Launched at =
the beginning of 2005, some 12,000 installations were covered, =
responsible for about 45 percent of the Union’s carbon dioxide =
emissions. Other greenhouse gases, and more installations, would be =
incorporated into the system in later phases. For the first sixteen =
months of the system, carbon permit prices more than tripled, only to =
collapse in April 2006 on the revelation that a number of countries =
had given their industries such generous caps that the industries =
were already in compliance and had no need to reduce emissions. This =
is just one of the problems with cap-and-trade schemes. Consider the =
burden of monitoring many thousands of sources–just what should =
their baseline emissions levels be, anyway? The temptation to cheat, =
to game the system, would be enormous. Already an entire industry has =
grown up around the trading system–analysts and brokers and traders =
who hope to make money from the scheme but contribute not much of =
anything to saving the planet. Also, cap-and-trade permit prices are =
tremendously volatile, more so even than the stock market. Volatility =
makes long-term planning very difficult.
A far better approach would be to tax carbon. A carbon tax would be =
simple–gasoline, coal and other fuels would be taxed based on their =
carbon content–and nearly impossible to evade. It could be =
introduced quickly, unlike the multiyear phase-in of the complicated =
EU cap-and-trade system. The tax rate could start low and then =
increase, to allow energy users to adjust. Unlike the market =
volatility of CO2 and SO2 permit prices, a carbon tax would be =
predictable, making it much easier for businesses and consumers to =
plan ahead. And as Charles Komanoff of the Carbon Tax Center argues, =
at least part of the proceeds of the tax could be rebated to poor and =
middle-income households through the income tax system, neutralizing =
any inequities. The unrebated balance could be used to subsidize =
alternative energy research and production. Given the historical =
successes of government funding of basic research in computing and =
medicine, there’s every reason to believe the products of this work =
would be very promising.
But the corporate elite and their favorite enviros hate the thought =
of carbon taxes. (One exception: FPL, n=E9e Florida Power and Light, =
recently endorsed a carbon tax.) In a weird piece for the website =
Grist, ED’s chief scientist, Bill Chameides, said that carbon tax =
advocates would give Congress a big pot of money to play with, which =
they’d use to subsidize their favorite technologies in pork-barrel =
fashion. Sounding like he was reading from GOP talking points, =
Chameides declared, “History has shown that the marketplace does a =
better job of developing new technologies, and a tax takes money out =
of the marketplace.”
In fact, that sort of ideology ignores history, which is replete with =
examples of market failure and cases of state support in crucial =
economic and technological development. The point of a carbon tax is =
to raise the cost of energy, seriously, and encourage people to use =
less of it while developing new, carbon-free sources. And the idea =
that Congress wouldn’t be tempted to play favorites with a massive =
carbon permit scheme is surreal.
That brings us to the crux of the problem: Raising the cost of energy =
means big changes in the way we live. Corporate-friendly enviros =
don’t like to hear that. In an interview, NRDC’s global warming czar, =
David Hawkins, denied that sacrifice would be necessary–because as- =
yet-unrevealed technological breakthroughs will allow us to gorge on =
energy and everything else. The investor and business coalition =
speaks confidently of “win-win” changes.
But the sailing might not be so smooth. Though advocates of cap-and- =
trade, like Hawkins, deny this, they seem seduced by a set-and-forget =
appeal to the technique. If, by some currently near-unimaginable =
miracle, serious restrictions on greenhouse gas emissions were =
enacted, it might not look like win-win. Few things annoy Americans =
more than higher energy prices, or being forced to take the train =
instead of the Escalade.
For people on the left, it’s hard to parse the politics of the =
climate issue. We’re used to a world in which business interests and =
their favorite politicians will do the right thing only if they’re =
forced to by popular mobilization. That’s not true of the climate =
issue: Though there are activists seriously devoted to the cause, =
it’s a long way from being the foremost concern of millions. So it’s =
tempting to look at the latest elite mobilization as something that =
could get a head start on avoiding catastrophe while we hope for more =
action from below. But you really have to wonder how serious these =
freshly mobilized business interests are. Can we trust them? Do we =
have any choice?