Ecological Economics: Money Matters, Mr. Daly

Alejandro Nadal

Let me put the positive up front. Professor Herman Daly and his colleagues in the school of ecological economics (SEE) have made important contributions to the study of sustainability and have increased awareness on the relations between economics and the environment. But there are serious problems with their approach that will hamper the future development of SEE. This is why I want to raise a couple of critical issues. What follows is a discussion on value theory that may sound old fashioned, but it needs to be brought out if we want to move ahead with a more meaningful discussion on economic forces and the environment.

According to Daly and colleagues, the fundamental problem with mainstream economic theory is its inability to analyze physical flows in economic systems. The story line is that conventional economic theory relies on the fallacy of a circular flow of commodities in a system in which natural resources are not finite. The flows are expressed in abstract or monetary units and can therefore be expanded indefinitely. According to Daly, from this flawed beginning of “money fetishism” economics erroneously concludes that physical quantities are also amenable to infinite growth.

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Greeks Bearing Gifts? An opportunity in the financial crisis

Dr. Gerhard Schick, MdB
In his recent blog piece, Mathias Vernengo invokes the Brazilian phrase “The Greek Present” (Presente de Grego) or unwelcome gift, to make his point that the Euro was an unwelcome present for Greece.  Rather than looking back and speculating about whether the Euro was introduced in a timely way in Greece, I want to look ahead and assert that the Greek crisis is an opportunity.  Never waste a crisis.  In a few years, if we succeed in overcoming the current problems, we might say that the progress made in economic governance in the wake of the Greek crisis was a gift.

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Estimating the Social Cost of Carbon

Frank Ackerman

For the first time, the U.S. government is working to limit carbon emissions – most notably through new fuel efficiency standards unveiled April 1. To inform cost-benefit analyses of proposed policies, the Obama administration has relied on an interagency group’s estimates of the “social cost of carbon,” the socioeconomic impact of every ton of carbon dioxide that goes into the atmosphere. The higher the social cost of carbon (SCC), the more stringent the regulatory standards that will be deemed to be worthwhile.

So far, no definite SCC has been set, but the interagency group has proposed $21 per ton. In a new Economics for Equity and the Environment (E3 Network) white paper, Liz Stanton and I analyze the economic models used by the interagency group. They find significant shortcomings, and show how they lead to substantial underestimates of the risks and costs of climate change.

Will America Buy a New Climate Policy?

James Boyce

Without much fanfare, U.S. legislators last December unveiled a new climate bill that just might succeed in breaking the political gridlock that has blocked action on global climate change. The bill, co-sponsored by Senator Maria Cantwell (D-WA) and Susan Collins (R-ME), is a sharp departure from the cap-and-trade bill that passed the House of Representatives last June but subsequently died in the Senate.

The Carbon Limits and Energy for America’s Renewal (CLEAR) Act proposed by Cantwell and Collins is a “100-75-25-0” policy:

  • 100 percent of the permits to bring fossil carbon into the U.S. economy will be auctioned. Polluters won’t get any permit giveaways, and there will be no scope for speculation and market manipulation by Wall Street traders.
  • 75 percent of the auction revenue is recycled directly to the public as equal per-person dividends. The majority of households will receive more in these monthly dividends than they pay in higher energy costs.
  • 25 percent of the auction revenue is dedicated to investments in energy efficiency, clean energy, adaptation to climate change, and assistance for sectors hurt by the transition away from the fossil-fueled economy.
  • Zero offsets are allowed. In other words, polluters can’t avoid curbing use of fossil fuels by paying someone else to clean up after them.

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Regional Financial Governance: Lessons from the Eurozone

Ilene Grabel

The strange, complicated drama involving the Eurozone’s bureaucratic core, Germany and Greece, European officials, and the IMF demonstrates that the matter of creating regional alternatives to the global financial architecture is politically charged and even fraught. The tensions raised around Greece reveal many of the deficiencies in Europe’s regional financial architecture—especially the puzzling absence of a lender of last resort, a regional surveillance mechanism, and a mechanism for coordinating fiscal policies among member nations. These deficiencies should be taken seriously by those working in the developing country context insofar as many of us have long looked toward regional financial governance as a more democratic and inclusive alternative to the global financial architecture.

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Selecting the Next U.N. Climate Chief: Mr. Secretary-General, Be Bold

Adil Najam

It is hiring season at the UNFCCC.

More precisely, the Bonn-based secretariat of the United Nations Framework Convention on Climate Change (UNFCCC) is seeking a new Executive Secretary, after the incumbent – Yvo de Boer, the third European in a row to have headed the secretariat – decided to resign after less than four years in office.

The deepest memories of Mr. de Boer’s term will remain the hype that was generated around and the subsequent failure of the 2009 Copenhagen negotiations to come up with any meaningful results. In fairness, Copenhagen cannot be blamed on Mr. de Boer. Things unraveled as they did largely for reasons outside of his control and despite his efforts.  However, the timing of his departure now gives the United Nations Secretary General – who will ultimately decide on his replacement – the responsibility to find someone who can help put the climate negotiations that are now in utter disarray back on tracks. He also has the opportunity with this appointment to give real direction to the ongoing debate on improved global environmental governance (GEG), which has been floundering and rudderless for some years.

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Cleaning up the Clean Development Mechanism: Performance Standards needed to ensure carbon reductions, development benefits

Lyuba Zarsky

The crisis in global climate talks may have clouded the future of the Kyoto Protocol but the Clean Development Mechanism seems to have a life of its own. The CDM, one of Kyoto’s three implementation mechanisms, allows companies in developed countries with Kyoto targets to offset their emissions by buying “certified emission reductions” (CERs) from investment projects in developing countries. As of November, 2009, some 1,860 projects in 58 countries were registered with the CDM, with another 400 in the pipeline. Some 335 million CERs have been created, worth, at a carbon price of $10-30/ton, $3-10 billion.

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Corporate Air Polluters Get Environmental Justice Report Cards

James Boyce

Michael Ash and I at the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst, have released a new edition of the Toxic 100 Air Polluters, a ranking of the top corporate air polluters in the United States.

The Toxic 100 rankings are based on releases of hundreds of toxic chemicals from industrial facilities across the country. The rankings take into account not only the quantity of releases, but also the toxicity of chemicals, transport factors such as prevailing winds and height of smokestacks, and the number of people exposed.

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Why is Obama Drilling?

Frank Ackerman

Once upon a time, “There’s Only So Much Oil in the Ground” was a popular song that could be heard on the radio. The year was 1974, and Tower of Power, an Oakland-based soul and funk band, was enjoying some commercial success. They made the year’s top 100 with “What is Hip?” In addition to the important topics of being young, hip, and falling in and out of love, they sang about the energy crisis. Following a brief OPEC oil embargo, the price of crude oil (in today’s dollars) jumped from $23 per barrel in 1973 to $41 in 1974. Everyone was thinking about the world’s finite and diminishing supplies of oil. As the song continued, “Sooner or later there won’t be much around.”

Now it’s later. What have we learned in the decades since OPEC, Tower of Power, and others brought the oil crisis to our attention? Back then, the Nixon administration’s energy policy included a big push to open the outer continental shelf to offshore oil and gas production. In 2010, the Obama administration has announced plans to open more of the outer continental shelf to oil and gas production.

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India and China: Not so decoupled from the global downturn

C.P. Chandrasekhar

With growth recovering significantly in China and India, these countries are once again being presented as decoupled giants who can revive the world economy. Advocates of “decoupling” argue that, despite the force of globalisation, some economies are relatively unaffected by the economic cycles characterising the rest of the world because the factors driving their growth are sui generis. However, this view has been discredited in recent years for two reasons. First, there appears to be a high degree of synchronisation of booms and busts in stock and housing markets across the world. If the appetite for investment among wealth holders or even wealth seekers was stoked anywhere in the world, such investment found its way across the globe, reviving diverse markets simultaneously, even if to differing degrees. The reverse was true when bearish sentiments prevailed.

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