Global Climate Change: Three Policy Perspectives V

CONTENTS FOR THIS SECTION

The Three Lenses and Policy Approaches

Cost Analysis as Viewed Through the Lenses

Technological Lens
Economic Lens
Ecological lens

The Three Lenses and Policy Approaches

Each of the three lenses implies fundamentally different ways of assessing policy actions to address global climate change. Crucial variations emerge in perspectives on cost analysis, scientific uncertainty, and the role of government.

Cost Analysis as Viewed Through the Lenses

The technological lens focuses attention on the outcome of the innovation; actions are justified if they resolve the pollution problem, and costs and benefits should be weighed in terms of the outcome, not in terms of the transitional costs. In contrast, those viewing the issue through the economic lens tend to focus on costs and benefits as the critical metric for evaluating policies; actions are justified when the benefits outweigh the costs, but not otherwise. The ecological perspective basically suggests that policy choices can be based on a recognition of "rights" rather than costs and benefits; the principles of protecting life and of preserving the ecosystem for future generations govern choices.

These differing viewpoints have implications for the timing and focus of invested resources. Looking through the technological lens, a policymaker would focus on investing resources directly in technical options. Some investment in understanding the problem may be necessary to delineate technical options, but new technologies may make extensive research in understanding the problem moot (as when a process change eliminates use of a chemical of concern). Looking through the economic lens, a policymaker would typically first invest resources in understanding the problem and the costs and benefits of alternatives. That assessment would reveal whether society would be better off adopting policies and committing resources to action -- e.g., to reduce carbon dioxide emissions. Looking through the ecological lens, a policymaker who perceives a risk to health and/or ecological systems would tend to promote immediate action. Investments in understanding the problem and the costs and benefits would be undertaken only to the extent appropriate to ensure cost-effectiveness of those actions. Because the ecological lens portrays benefits largely in non-economic terms (sustainability, equity), efforts to quantify and monetize those benefits may be viewed as inappropriate -- even immoral. Instead, people are provided with alternatives to act on the problem, allowing them to choose a "responsible" option, even if it costs more than a traditionally defined "economic" option.

Technological Lens. Those using the technological lens see it as a "far-sighted," economically justifiable approach to global climate change. Technology is seen as the impetus for improved efficiency in the economy, concomitant with improved environmental protection. Although the development of technology may be encouraged for a variety of reasons, its commercialization is ultimately based on cost-effectiveness. In terms of the substance of the environmental issue, the user of the technological lens is typically agnostic or indifferent. The current economic system is viewed as inefficient when economic decisionmaking is considered on a "life-cycle" basis. When considered on this broader perspective, reductions in carbon emissions may be possible at no net costs to the economy -- even at net savings.

Under the technological lens, the parameters of cost analysis change. Concepts like "life-cycle" costs are pivotal in making the cost-effectiveness case for new technology. Existing barriers (institutional or financial) to the rapid and widespread commercialization of new technologies are seen as artificial constraints to be overcome by government and individuals. The focus of analysis is on cost-effectiveness of solutions, not so much on the benefits of the policy.

Economic Lens. The view through the economic lens fits the global climate change issue within the boundary of market economics. The motivations of people in reducing pollution is unimportant; the critical assumption is that people will act in their own self-interest as dictated by price signals. The global climate change issue becomes another consideration in setting prices -- an externality that needs to be internalized. If that price increment does not result in significant reductions, it is because none is economically justified.

Under the economic lens, the potential impacts of controlling greenhouse gases on the economy versus expected benefits is a central variable in determining the degree and time frame of reductions. Economic efficiency is the primary criterion for assessing emission reduction programs. Any existing inefficiencies in the economic system are assumed to reflect market reality and to be difficult to eliminate (and eliminating them may be undesirable). Uncertainty about the potential benefits is understood to be a factor in determining the stringency of any reduction program and a potential reason for stretching out compliance. For this lens, cost-benefit analysis is very important in assessing potential control programs. To the extent that new technology is projected to be cost-effective and can overcome any existing market barriers or distortions, its impacts will be included in the cost part of the cost-benefit equation.

Ecological lens. Those looking through the ecological lens are suspicious of attempts to measure the economic effects of global climate change options. Most efforts to measure economic effect involve comparing a carbon control scenario with a "baseline" projection. The baseline generally is defined as the path the economy would take assuming no changes attributable to adoption of climate change policies. However, the baseline also tends to connote a path with no distortion; it is the path from which distortions are measured. This conveys some normative legitimacy on the baseline. If global climate change arguments are correct, then the current path is not sustainable in the long run, and the baseline means little -- a concern reflected in on-going efforts to incorporate "green accounting" into major economic indicators, such as the Gross Domestic Product (GDP).⁽⁶⁴⁾ Arguably, if an ecological perspective returned the actual path to long-term sustainability, that scenario would represent the more reasonable baseline. Discussions of economic "growth" and "distortions" are relative to one's perspective on the long-term potential for economic growth in a world with increasing carbon dioxide concentrations.

Commonly, those looking through the ecological lens tend to dismiss economic cost analysis, and particularly cost-benefit analysis, as being of limited usefulness in the overall debate on global climate change, while acknowledging that they can have utility in developing and choosing specific options. From the ecological perspective, people should respond to the global climate change crisis because of its threat to important values, such as the fate of future generations, not because action can be justified on the basis of some narrowly defined cost-benefit analysis. Traditionally, such analysis tends to place value only on those benefits that can be easily quantified, while discounting or ignoring many values that would be seen as governing through the ecological lens. Viewed through the ecological lens, lives and such values as intergenerational equity should not be quantified as a commodity.⁽⁶⁵⁾ In this view, treating the fate of future generations in terms of cost-benefit analysis and market forces should be accorded the same social condemnation allotted those who "prostitute" themselves by selling something for money that should not be sold. What people need are alternatives to many of the choices that the marketplace provides based on traditionally defined economic considerations.⁽⁶⁶⁾

At the same time, a burgeoning area of study is ecological economics, and in particular analyses to determine the economic benefits of ecosystems services, which include climate regulation.⁽⁶⁷⁾ Such studies may serve to defend environmental values that are rarely accounted for in traditional economic analyses; they also provide another example of the intertwining of the viewpoints.

Footnotes

52. ^(back) Leopold, p. 239.

53. ^(back)For links to diverse efforts to inform the public about global climate change, see the CRS Global Climate Change Briefing Book, at:

http://thomas.loc.gov/brbk/html/ebgcclnk.html

54. ^(back)United Nations Framework Convention on Climate Change, article 2.

55. ^(back)The efforts are spearheaded by the Center's Business Environmental Leadership Council whose members include: American Electric Power, Boeing, Company, BP America, Enron Corp, Intercontinental Energy Corporation, Lockheed, Maytag, The Sun Company, 3M, Toyota, United Technologies, U.S. Generating, Whirlpool Corporation. The quotations in this paragraph are from the Pew Center on Global Climate Change's website: http://www.pewclimate.org/home.html

56. ^(back)For a general discussion of green pricing, see Steve Pickle and Ryan Wiser, "Green Power Marketing, Public Utilities Fortnightly, December 1977, pp. 30-35.

57. ^(back)Ibid., p. 31.

58. ^(back)For a description of alternatives available in California, see the Natural Resources Defense Council web site at http://www.igc.org/nrdc/howto/encagp.html#results

59. ^(back) Alexi Clarke, "Buyer Beware," New Scientist (13 June 1998), 49.

60. ^(back)See, for example, the White House Initiative on Global Climate Change, "Fact Sheet on Potential Industry Sector Savings" (October 22, 1997), at

http://www.epa.gov/oppeoee1/globalwarming/actions/global/clinton/savings.html

61. ^(back)Fred Sissine, Energy Efficiency: The Road to Sustainable Energy Use? CRS Issue Brief IB97027.

62. ^(back)http://www.ase.org

63. ^(back)However, some "deep ecologists" reject technological fixes and the use of market mechanisms on the grounds that they merely further a nonsustainable system that needs to be replaced.

64. ^(back)Carol S. Caron, "Integrated Economic and Environmental Satellite Accounts," Survey of Current Business (April 1994), 33-49.

65. ^(back)The ecological view was shown in the negative response to an economic analysis prepared for the U.N.'s Intergovernmental Panel on Climate Change; "The Social Costs of Climate Change: Greenhouse Damage and Benefits of Control" valued projected deaths of persons in OECD nations at $1.5 million each while deaths of persons from China, India, and Africa were valued at $150,000 each. From an ecological or human rights standpoint the discrepancy raises ethical concerns. See John Adams, "Cost-Benefit Analysis: The Problem, Not the Solution," The Ecologist, 26 (January/February 1996), 3.

66. ^(back)Peter G. Brown, "Toward an Economics of Stewardship: the Case of Climate," Ecological Economics 26 (1998), 11-21.

67. ^(back)Robert Constanza, et al., The Value of the World's Ecosystem Services and Natural Capital," Ecological Economics 25 (1998), 3-15 [originally published in Nature, 387 (May 15, 1997), 253-260]; the issue contains a number of comments on the article as well.

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