The Paris Climate Change Agreement: Beginning of “The Economics of the Coming Spaceship Earth”?

Edward B. Barbier

Edward B. Barbier is the John S. Bugas Professor of Economics at the University of Wyoming

Fifty years ago, in March 1966, Kenneth Boulding presented his landmark essay, “The Economics of the Coming Spaceship Earth” at a workshop in Washington, D.C.  With its vision of the “spaceship earth,” this short treatise has had a profound influence on thinking about the global economy and sustainability over the past half century.

In the most famous passage, Boulding describes the open economy of the past with its seemingly unlimited resources and contrasted it with the closed economy of the future.  He wrote:

“I am tempted to call the open economy the ‘cowboy economy,’ the cowboy being symbolic of the illimitable plains and also associated with reckless, exploitative, romantic, and violent behavior, which is characteristic of open societies. The closed economy of the future might similarly be called the ‘spaceman’ economy, in which the earth has become a single spaceship, without unlimited reservoirs of anything, either for extraction or for pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy.”

The essay was influential for two reasons.

First, as Boulding emphasized in his opening sentence, creating a more sustainable economy requires humankind rethinking its relationship with nature: “We are now in the middle of a long process of transition in the nature of the image which man has of himself and his environment.”  Boulding recognized that this change in worldview would be difficult, as “the image of the frontier is probably one of the oldest images of mankind, and it is not surprising that we find it hard to get rid of.”

Second, as an economist, Boulding recognized that the main impetus for change must occur in the basic production and consumption relationships of modern economies: “The closed earth of the future requires economic principles which are somewhat different from those of the open earth of the past.”

These central messages of Boulding’s essay are still relevant to contemporary debates over how best to reconcile global economic development with environmental sustainability.

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TTIP and Climate Change: Low Economic Benefits, Real Climate Risks

Matthew C. Portersfield and Kevin Gallagher

Matthew C. Porterfield is Deputy Director and an adjunct professor at the Georgetown University Law Center’s Harrison Institute for Public Law. Kevin P. Gallagher is Professor of Global Development Policy at Boston University’s Pardee School for Global Studies, where he co-directs the Global Economic Governance Initiative.

Climate change governance should inform global governance more broadly, including international trade and investment policy. One of the most important trade and investment agreements is the Trans-Atlantic Trade and Investment Partnership (TTIP)—currently under negotiation between the European Union and United States—given the role the agreement will likely play in establishing rules for the global economy in the 21st century.
The current model that the TTIP is based on will increase carbon dioxide emissions and jeopardize the ability of Europe and the United States to put in place effective policies for mitigating climate change. Trade and investment treaties should be used to help achieve the broader climate change objectives of Europe and the United States, not hinder them.

This short brief outlines how the TTIP can increase emissions and restrict the ability of nations to adequately mitigate and adapt to climate change and offers a set of recommendations that would make EU–U.S. trade policy more consistent with global climate change goals.

TTIP will Increase Carbon Emissions

Given that the United States and Europe already enjoy a strong trade and investment relationship, the economic benefits of the treaty are projected to be relatively small. The most cited studies in the European debates are by Ecorys, the Centre for Economic Policy Research (CEPR) and Tufts University. The first two studies find that the treaty will boost GDP among the parties by less than 1 per cent for the United States and Europe, though the Tufts study finds that the impacts on GDP will be slightly negative in the EU.1

Despite the small projected economic gains of the treaty, the Ecorys study projects that it will increase emissions by 11 million metric tons. The increase in emissions is just 0.07 percent from the baseline, smaller than the 0.47 increase in GDP projected by Ecorys. When multiplied by estimates of the social cost of carbon, carbon emissions would cost the European Union USD1.4 billion annually.2

This finding is consistent with the broader literature. According to a comprehensive assessment of the literature conducted by the World Trade Organization and the United Nations Environment Programme, most trade and investment agreements tend to increase carbon emissions.3 It should be noted that the Ecorys study is only a partial one because it does not look at the environmental impacts of many “nontariff barriers,” such as certain domestic subsidies. There has also been inadequate consideration of the potential impact of TTIP provisions that could limit the ability of governments to design and implement effective climate change policy. As we will see, it is the deregulatory aspect of the TTIP that poses the highest risk to climate change policy.

Regulatory Risks of the TTIP

The TTIP could jeopardize the ability of the European Union and the United States to put in place the proper regulations to meet climate targets. The legal effects of the TTIP could take a variety of forms, including broad restrictions on regulatory authority under investor-state dispute settlement (ISDS) provisions, limits on carbon intensity standards, modifications of the U.S. fossil fuel export regime and restrictions on renewable energy programs.

Broad Restraints on Climate Regulations under Investment Rules

The TTIP’s investment chapter will likely provide investors with certain broad rights, including “fair and equitable treatment” and compensation for regulations deemed to constitute acts of “indirect expropriation.” These rights would be enforceable by private corporations, including fossil fuel companies, through the controversial ISDS process, which could be used to challenge a wide range of government measures affecting climate change.4 Similar rules under other treaties have been used to challenge environment-related measures, including a claim under the Energy Charter Treaty based on Germany’s regulation of a coal-fired power plant5 and a pending challenge under the North American Free Trade Agreement (NAFTA) to Quebec’s moratorium on hydraulic fracturing or “fracking.”6

Limits on Carbon-Intensity Standards

Regulations that limit the carbon intensity of transportation fuels could also be targeted under the TTIP. United States Trade Representative Michael Froman has reportedly used the TTIP negotiations to pressure the European Union to weaken the carbon intensity standards of the EU’s Fuel Quality Directive (FQD) in order to facilitate the export of high-carbon-intensity oil.7 Although the European Commission subsequently modified the FQD proposal to accommodate the dirtier oil,8 the TTIP negotiations could be used to impose restrictions on future efforts to implement carbon intensity standards for fuel.9

Modification of the Fossil Fuel Export Regime

One of the European Union’s principal objectives in the TTIP negotiations is to secure “a legally binding commitment . . . guaranteeing the free export of crude oil and gas resources [from the United States] by transforming any mandatory and non-automatic export licensing procedure into a process by which licenses for exports to the EU are granted automatically and expeditiously.”10 Creating an “automatic” and “expeditious” process for U.S. crude oil and gas exports could result in more greenhouse gas (GHG) emissions than projected in quantitative analyses by promoting the production and consumption of these fuels.

Although natural gas is widely viewed as a lowercarbon alternative to other fossil fuels such as oil and coal, expanded exports of liquefied natural gas (LNG) could actually increase GHG emissions for several reasons. Liquefying, transporting and regasifying natural gas is energy-intensive, causing exported LNG to be approximately 15 per cent more carbon-intensive than natural gas that is used domestically. In addition, increased LNG exports will raise the price of natural gas in the United States, potentially resulting in the use of more coal to produce electricity. Expanded LNG exports will also encourage increased fracking for the production of natural gas, which could cause increased accidental releases of natural gas, known as “fugitive methane emissions.”11 Given that methane is a much more powerful greenhouse gas than carbon dioxide, “any climate benefits from increased natural gas use internationally could be dwarfed by accelerated warming caused by fugitive methane emissions.”12

Restrictions on Renewable Energy Programs

The TTIP could also conflict with efforts to address climate change by imposing new restrictions on policies designed to promote renewable energy. Trade rules are already being used to challenge alternative energy programs. Since 2010 about a dozen disputes have been brought over renewable energy programs.13 The European Union has indicated that it intends to use the TTIP negotiations to seek new restrictions targeting renewable energy programs that contain local content requirements.14 Proponents of local content provisions argue that they are essential for developing the political support that will be necessary to maintain and expand renewable energy programs.

Putting Climate Change First

At the Paris Summit and in the newly crafted Sustainable Development Goals (SDGs) at the United Nations, the world’s nations have pledged to “take urgent action to combat climate change and its impacts.”15 The TTIP must not undermine this goal.

Both the European Union and the United States have made strides in prioritizing climate change in other areas of global economic governance, but not in international trade and investment policy. The European Investment Bank and the European Bank for Reconstruction and Development—the EU’s multilateral development banks (MDBs)— significantly restrict the financing of fossil-fuelintensive economic activity. The United States also has executive orders that restrict the ability of the United States to support the financing of coal projects through MDBs of which it is a member, and mandates that all projects be climate resilient. Such an approach is urgently needed in the TTIP.

The negative economic and regulatory impacts of the TTIP on climate policy noted above are not inevitable. A bold approach could be put forth where the TTIP excludes climate mitigation measures from ISDS, protects renewable energy programs and carbon-intensity standards, and discourages the production and consumption of fossil fuels.
As first steps in striking a new economic relationship that enhances our climate change goals, the United States and the European Union should commit to three principles: (1) The potential economic and regulatory impacts of the TTIP on climate policy should be carefully studied. (2) The provisions of the TTIP should be fully compatible with and supportive of climate policy objectives. (3) The TTIP should, at a minimum, not result in a net increase in GHG emissions—which is to say, the TTIP must be carbon neutral or better.

As the SDGs articulate, “climate change is a global challenge that does not respect national borders. Emissions anywhere affect people everywhere. It is an issue that requires solutions that need to be coordinated at the international level.”16 Trade and investment policy should not be an exception.

Originally published as an International Institute for Sustainable Development Commentary. The authors would like to acknowledge the Wallace Global Fund for providing the support that made this policy brief possible.

Notes

1. Despite the small projected economic gains of the treaty, the Ecorys study projects that it will increase emissions by 11 million metric tons. The increase in emissions is just 0.07 percent from the baseline, 1 See Ecorys, 2009, Non Tariff Measures in EU-US Trade and Investment –An Economic Analysis, ECORYS Nederland BV; and CEPR, 2013, Reducing Transatlantic Barriers to Trade and Investment, Centre for Economic Policy Research, London; for a discussion of the limits of CGE modeling see Ackerman, F., and K. Gallagher. 2004. “Computable Abstraction: General Equilibrium Models of Trade and Environment.” In The flawed foundations of General Equilibrium: critical Essays on Economic theory, ed. F. Ackerman and A. Nadal, 168–80. New York: Routledge and Ackerman, Frank, and Kevin P. Gallagher, 2008, “The Shrinking Gains from Global Trade Liberalization in Computable General Equilibrium Models”, International Journal of Political Economy, vol. 37, no. 1, Spring, pp. 50–77.

2. EC Staff Working Document, Impact Assessment on the Future of EU-US Trade Relations (2013)(“EC Impact Assessment”) at 49, available at http://trade. ec.europa.eu/doclib/docs/2013/march/tradoc_150759.pdf. On the social cost of carbon (SCC), 11 million tons is multiplied by the average estimate in this comprehensive review of estimates J.C.J.M. van den Bergh and W.J.W. Botzen (2014), “A lower bound to the social cost of CO2 emissions,” Nature Climate Change 4, 253-258.

3. World Trade Organization & United Nations Environment Programme. (2009). Trade and climate change, (p. vii). Retrieved from https://www.wto.org/english/ res_e/booksp_e/trade_climate_change_e.pdf.

4. See Gus Van Harten. (2015). An ISDS carve-out to support action on climate change. Osgoode Hall Legal Studies Research Paper No. 38/2015. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2663504; Meredith Wilinsky. (2014, August 7). Potential liability for climate-related measures under the TransPacific Partnership. Retrieved from http://web.law.columbia.edu/sites/default/files/ microsites/climate-change/wilenskytranspacificpartnership8-7-14_-_revised.pdf.

5. Nathalie Bernasconi-Osterwalder & Rhea Tamara Hoffmann (2012). The German nuclear phase-out put to the test in international investment arbitration? Background to the New Dispute Vattenfall v. Germany (II) (p. 4). Retrieved from http://www.iisd. org/pdf/2012/german_nuclear_phase_out.pdf.

6. Lone Pine Resources Inc. v. Canada (UNCITRAL), Notice of Arbitration, paras. 48–52 (Sept. 6, 2013). Retrieved from http://www.italaw.com/sites/default/files/ casedocuments/italaw1596.pdf.

7. From Inside U.S. Trade (2013, September 19). Froman pledges to preserve Jones Act, criticizes EU Clean Fuel Directive: Froman raised concerns about trade impacts of the FQD “with senior European Commission officials repeatedly, including in the context of the . . . TTIP negotiations.”

8. From Inside U.S. Trade (2014, October 14). EU backpedals on vehicle fuels policy in face of U.S., Canadian pressure.

9. From Inside U.S. Trade (2014, October 14). EU backpedals on vehicle fuels policy in face of U.S., Canadian pressure: “[O]utgoing EU Climate Action Commissioner Connie Hedegaard . . . signaled that the EU was leaving the door open to directly targeting tar sands . . . for penalties in the future.”

10. Council of the European Union. (2014, May 27). Note for the attention of the Trade Policy Committee: Non-paper on a Chapter on Energy and Raw Materials in TTIP. Retrieved from http://www.scribd.com/doc/233022558/EU-Energy-Nonpaper.

11. World Resources Institute, (2013, May 20). What exporting U.S. natural gas means for the climate. Retrieved from http://www.wri.org/blog/2013/05/whatexporting-us-natural-gas-means-climate.

12. Ibid.

13. Cathleen Cimino & Gary Hufbauer. (2014, April). Trade remedies: Targeting the renewable energy sector (p. 19). Retrieved from http://unctad.org/meetings/en/ SessionalDocuments/ditc_ted_03042014Petersen_Institute.pdf.

14. European Commission. (2013). EU–US Trade and Investment Partnership, raw materials and energy: Initial EU position paper (p. 3). Retrieved from http://trade. ec.europa.eu/doclib/docs/2013/july/tradoc_151624.pdf.

15. United Nations. (n.d.). Goal 13: Take urgent action to combat climate change and its impacts. United Nations Sustainable Development Goals. Retrieved from http://www.un.org/sustainabledevelopment/climate-change-2/.

16. Ibid.

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What to Expect in 2016?

Martin Khor

It is the time again to bid farewell to the old year and to welcome the new one.

Last year was very eventful on the environmental and economic fronts, and 2016 promises to be the same, if not more so.

For those passionate about the fate of the planet, 2015 closed with a bang, following the adoption of a global deal on climate change in December, but not before a nail-biting last day when the fate of the Paris conference hung uncertainly.

Finally, a deal was put together, generally satisfying both developing and developed countries.

The developing countries, led by the G77 and China, and also the like-minded developing countries (LMDCs), managed to stand firm on their demands and secured acceptance of most of their points, though diluted through compromise.

Malaysia played a crucial role on behalf of the developing countries, being both spokesperson for the LMDCs as well as a coordinator for the G77 and China.

The US and its allies also got their way.

The result is a weak agreement that depends on each country to determine what it can do on mitigation (reducing or slowing down emissions) and with no official compliance mechanism to discipline those countries that do not perform even according to their own expectations.

From a purely environmental perspective, the Paris deal was thus nothing to shout about.

Some may even consider it a failure.

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The Future of Work

Consider the Changing Climate

Juliet Schor

Juliet Schor is a professor of sociology at Boston College. She known worldwide for her research on the interrelated issues of work, leisure, and consumption. Her books on these themes include The Overworked American: The Unexpected Decline of Leisure, The Overspent American: Upscaling, Downshifting, and the New Consumer, and Plenitude: The New Economics of True Wealth (retitled True Wealth for its paperback edition).

Over the last year or two I’ve noticed that conversations about the future of work are now mostly about machines—how smart ones will do fantastic things to make our lives better, or how they’ll make human labor redundant and create a jobless dystopia. My training in economics has led me to be skeptical of both sides in this debate. After all, during the Industrial Revolution extraordinary labor-saving technological change had both good (cheaper products) and bad (pollution) effects. It also resulted in a tremendous increase in hours of work. The lesson from this historical episode, and plenty of others, is that technology doesn’t determine incomes, distribution, employment, or quality of life. It’s one factor in a much larger context.

Today, that context must include consideration of climate change, which has been almost totally missing from discussions about the future of work. The most obvious reason climate change matters is that it promises to be extremely disruptive. Even if the global community can pull off the equivalent of a Hail Mary pass and limit warming to two degrees Celsius, plenty of climate chaos is still in store. At this point, a future of four degrees of warming is more likely, given current national pledges for emissions reductions and considerable uncertainty about them.

This implies catastrophic sea level rise, drought, plummeting agricultural yields, frequent extreme weather, and human migrations on a large scale. These will lead to some predictable changes in the world of work: more need for first responders, health professionals, civil engineers, and aid workers, among other occupations. Climate chaos will also have large macroeconomic effects, reducing investment, consumption, and employment. A just-published study in Nature found that more than a fifth of GDP will be lost by the end of this century, much more than previous models have predicted. Another increasingly likely scenario is the bursting of the carbon bubble, once reserves already priced into fossil fuel company valuations are recognized to be unburnable and these companies’ assets collapse. Climate mayhem leads to economic mayhem. The operative word for the future of work would be shrinkage.

But this apocalyptic future is not our only option. Acting forcefully on emissions today could dramatically increase the likelihood of not only containing warming, but also making work more sustainable, satisfying, and productive. To see how, we need to consider the connection between working hours and carbon emissions, a key link that has been absent from all climate models and the climate change conversation.

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U.S. Matters

Sunita Narain

This blog post, from regular Triple Crisis contributor Sunita Narain, expands on the arguments put forth in her earlier letter (with co-author Chandra Bhushan) about their recent report on U.S. government policy on climate change: “Captain America: U.S. Climate Goals—A Reckoning.” Narain raises tough criticisms here not only of the inadequate steps that the U.S. government has taken on climate mitigation, but also the complacency of U.S. civil society in counseling the world to wait for the United States to get its act together. As she points out, the world cannot afford to wait, for every day of delay further shifts the burdens of climate mitigation from the U.S. to other shoulders. —Eds.

Why should we look at the U.S. to check out its climate action plan? The fact is that the U.S. is the world’s largest historical contributor to greenhouse gas emissions—the stock that is already in the atmosphere and already warming the earth’s surface—and the second largest contributor (after China) to annual emissions. What the U.S. does makes a huge difference to the world’s fight against runaway climate change. It will also force others to act. It is, after all, the leader. And now, after nearly three decades of climate change denial, the U.S. has decided enough is enough. President Barack Obama has said clearly that climate change is real, and his country must act. It has submitted its Intended Nationally Determined Contribution (INDC)—its emissions reduction framework—to the climate treaty secretariat. The world is already celebrating—the prodigal has returned.

My colleague Chandra Bhushan and I humbly disagree. Our research, which we present in our just released report, Capitan America, presents a few inconvenient truths that might throw cold water on the celebration. The U.S. climate action plan is neither ambitious nor equitable. Worse, it is but business-as-usual. When implemented emissions reduction will be marginal. Whatever reduction is achieved, whether due to increased efficiency or a shift in fossil fuel use, will be negated by runaway gluttonous consumption. We conclude, for the sake of the world’s future: American lifestyle can no longer remain non-negotiable.

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U.S. Climate Goals: A Reckoning

The editors of Triple Crisis blog received the following letter from regular contributor Sunita Narain and her co-author Chandra Bhushan about their recent report on U.S. government policy on climate change. “Captain America: U.S. Climate Goals—A Reckoning.” They raise tough criticisms of the weak and halting steps that the U.S. government has taken, and express apt concern about whether U.S. ways of production and consumption can long persist—let along be replicated around the world—without causing irreversible and catastrophic harm. Make sure to check out the links, to a summary of key findings and to the full report. —Eds.

We are sending you a link to our just released report, Capitan America in which we take a close and careful look at the U.S. government’s action plan on climate change.

http://www.cseindia.org/userfiles/Capitan-America-Report.pdf

There is also a link to our presentation on our key findings.

http://cseindia.org/userfiles/Capitan%20america%20-%20final%20presentation.pdf

We write this report knowing that the threat of climate change is real and urgent. We know this because we in South Asia are already seeing horrific impacts of changing weather, hitting the most poorest and most vulnerable. We strongly believe the world needs an effective and ambitious climate change deal. In this context we ask if the U.S. climate action plan is ambitious, equitable or sufficient? We ask this because it is said that even if U.S. Intended Nationally Determined Contribution (INDC) is not ambitious, it signals a change in the country’s position. And that it will build momentum in the future. The question is if the U.S. is on track to make real reductions in greenhouse gas emissions?

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China’s Clean Energy Plans—Enough to Stave Off Climate Change?

Sara Hsu

I have written previously on China’s environmental status and the creation of “green” jobs, noting that more must be done to win Premier Li Keqiang’s “war on pollution.” More news has come out, including the statement that China is set to spend $2.5 trillion in the coming 15 years on clean energy, according to Rae Kwon Chung, principal advisor on climate change for the UN Secretary-General. The statement was made at the China Summit on Caring for Climate, a UN Global Compact Network event. China intends to cut carbon dioxide emissions and increase the supply of renewable energy, in an attempt to reach its goal of obtaining 20% of its power from renewables and nuclear power by 2030. Will this be enough to stave off climate change?

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Promise Me the Monsoon

Sunita Narain

Why this weird weather? Why have western disturbances—the extra-tropical storms that originate in the Mediterranean and Atlantic seas—been lashing us again and again, with devastating impacts on agriculture? Is this normal? Or has weird weather become the new definition of normal?

The India Meteorological Department says the severe and unseasonal rain this year has been because of the confluence of western disturbances with the easterlies from the Bay of Bengal which is normal. But what they cannot explain is why the frequency of the western disturbances has increased and why the impact of this confluence is being felt all the way up to central India which is unusual and definitely not normal.

Indian scientists are extremely cautious about using the CC—climate change—word. But it is now widely recognised that warming is making the world’s weather more unstable and extreme. How much is the question. Scientists would agree on saying that although no single extreme weather event could be attributed to climate change, the increased frequency and intensity of such events is definitely because of human-made climate change. Now, this science is becoming more exact. A recent paper published in Nature Climate Change finds that the observed average global warming of 0.85°C is responsible for 75 per cent of the daily heat extremes and 18 per cent of the precipitation extremes. More worrying is the conclusion that as the temperature increases to 2°C—which is likely, given the lack of global effort in cutting greenhouse gas emissions—40 per cent of the rainfall extremes will be linked to human-made climate change.

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Avaaz’s Climate Vanity

Upward gazing can be politically blinding

Patrick Bond

Who’s not heard the great African revolutionary Amilcar Cabral’s injunction, fifty years ago, “Tell no lies and claim no easy victories”? If, like me, you’re a petit bourgeois who is hopeful for social progress, then let’s be frank: this advice hits at our greatest weakness, the temptation of back-slapping vanity.

The leading framers for the 41-million strong clicktivist team from Avaaz need to remember Cabral. They over-reached ridiculously last week in praising the G7:

Bond Avaaz

Many told us it was a pipe dream, but the G7 Summit of leading world powers just committed to getting the global economy off fossil fuels forever!!! Even the normally cynical media is raving that this is a huge deal. And it’s one giant step closer to a huge win at the Paris summit in December – where the entire world could unite behind the same goal of a world without fossil fuels – the only way to save us all from catastrophic climate change… Our work is far from done, but it’s a day to celebrate – click here to read more and say congratulations to everyone else in this incredibly wonderful community!!

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