Homo Oecnomicus and The Climate

Michael F.
Hoexter Homo Oeconomicus and the Climate

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Sorry, Kyoto Signatories, Emissions Traders, Carbon Taxers,
Homo Oeconomicus Wont Save the Climate

Michael Hoexter, Ph.D.
Terraverde Consulting
Email: michael.terraverde@gmail.com
http://greenthoughts.us/pdfs
http://neweconomicperspectives.org/category/michael-hoexter

April 2014

Contents

1. Introduction: Context of Existing Climate Policy

2. Betting the World on Self-Interest and Individualism

3. Government and the Moral Force of the Human Community

4. Existing Climate Policy Lacks a Drive Axle Between Ethical Impulse
and Policy Implementation

5. An Example: James Hansen and Carbon Pricing

6. Background for an Actually-Effective Climate Policy

7. Outline of an Actually-Effective Climate Policy

8. Actually-Effective Climate Policy: A Massive Commitment of Public and
Private Resources

1. Introduction: Context of Existing Climate Policy

Together, as a world economic system, we are currently on an emissions trajectory to
achieve anywhere from 4 to 6 degrees Celsius (7 to 11 degrees Fahrenheit) warming by
2100. Global average temperature increases within this range mean catastrophe for
humankind, with sea level rises of at least 3 meters (10 feet) and a vastly more hostile
environment for human life and co-evolved species. Humanity may be, with these
emissions levels either bringing about its own extinction as the effects of the resultant
warming set in or, at least, so degrading the conditions of life that very few humans will
be able to survive. We will have to reduce the currently escalating rate of increase of
emissions to zero and then over a period of two to three decades reduce net
greenhouse gas emissions to zero in order to have a chance of stabilizing the climate
and not significantly endanger the welfare of future generations.
Michael F. Hoexter Homo Oeconomicus and the Climate
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These higher levels of warming are not inevitable but over 15 years of climate policy,
the policy that would stabilize and decrease the concentration of warming gases, has not
been effective or nearly effective enough depending on your viewpoint. Twenty-two
years after the UNs Rio summit, 17 years after the Kyoto Protocol was chosen as the
central worldwide policy to curb emissions, and 9 years after Kyoto mechanisms were
put into effect, the emissions trading policies of Kyoto have not had a substantial effect
on the trajectory of emissions. While much of the greenhouse gas emissions growth
has occurred outside those countries that have instituted an emissions trading system
internally, fluctuations in emissions accounted for throughout the world are bound
more closely to broad economic and political factors other than the institution of an
emissions trading scheme. More influential than emissions trading have been: rapid
economic growth, relocation of emissions intensive industries like cement and steel,
emissions that may escape current accounting regimes, and economic recessions. China
leads recent emissions growth with other rapidly developing countries because a
confluence of two of these factors (relocation and growth of emissions-intensive
industries and overall rapid economic growth), while decreases in Europe and the
United States are largely attributable to recessions plus deindustrialization. Self-
congratulation in the US regarding recent decreases in emissions are, in addition,
enabled by an under-counting of the effects of fugitive methane from natural gas
extraction and distribution networks.

Climate policymakers, if they take their job seriously, have an unenviable task: the fate
of civilization weighs on the success or failure alone of the policy they create and enact.
Climate policy must attempt to change the massive, complex socio-economic and
technological systems and land-use trends which sustain high emissions and
simultaneously enable the creation of a zero-net-emission society around the globe,
within a span of two to three decades. In addition land-use policy and/or perhaps new
geoengineering technology will have to reduce as much as possible, existing
concentrations of greenhouse gases in the atmosphere and oceans.

In their design, most existing climate policies selected to deal with climate change were
versions of a policy, cap-and-trade, that had been originally designed to deal with a much
more circumscribed problem with a fixed set of technical or coal-sourcing solutions:
reducing acid rain by the reduction of sulfur dioxide emissions (actually a cooling
influence on the climate) from coal-fired power plants. The policy was initially designed
to encourage coal plant owners to install emissions-scrubbing technology via a system of
auctioning off tradable pollution permits that would become more limited in quantity
and therefore more expensive over time, supposedly creating an effective, rising price
for emissions.

While advocates for cap-and-trade attempted to attribute reductions in acid rain and
sulfur dioxide emissions during the 1990s and 2000s to cap-and-trade, the most
important contributing factor to reductions has been the practice of transporting low
sulfur coal from the Western US which increased in the 1990s due to freight railway
deregulation and resulting cost reductions in transport and therefore the effective price
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of Western low-sulfur coal to power plant operators in the Eastern US. With the
presence of at least two off-the shelf technological or operational options at an
affordable cost, the reduction of sulfur dioxide emissions was, in comparison to global
warming, falling-over easy. The US federal government has since then introduced
direct regulation of power plants which has led to the collapse of sulfur dioxide
emissions trading markets. Despite this recent history, during the period in which the
first wave of climate policy instruments were selected, the economists and policy
advocates most invested in cap-and-trade continued to repeat the words market-
based and cost-effective attached to cap-and-trade or carbon pricing enough
times to foreclose a critical discussion of its merits and demerits.

2. Betting the World on Self-Interest and Individualism

The central actor in emissions trading (the generic term for cap-and-trade), the motive
force for emissions-reduction decisions on a day-to-day basis in the economy, is Homo
oeconomicus. Homo oeconomicus or economic man is the model of the individual
economic actor assumed by most economists, especially mainstream neoclassical
economists, as well as many participants in the political process of varying backgrounds
and ideologies. Stripped down to essentials, Homo oeconomicus is an autonomous
rational calculator of self-interested advantage to him or her, in the language of
mainstream economics, a utility maximizer. Homo oeconomicus is only superficially a
social animal, contradicting empirical evidence and subjective experience that suggests
that people are highly social. Another way to describe Homo oeconomicus is that it
simply an expression of neoclassical economics methodological individualism a
founding assumption that suggests that neoclassical economics is, whether economists
are conscious of it or not, an ideological operation more than a description of reality.
Thus theories and policies that assume Homo oeconomicus would tend to overlook social
relationships, interactions and the role of institutions and groups. Resulting from these
assumptions, neoclassical economics is a description of a particulate economy

In the case of the original emissions trading instrument, the utility-maximizing economic
actors (i.e. people and organizations) that were supposed to realize the policy goals,
were the owners of power plants, usually power utilities. The power companies
owning coal fired power plants would make decisions to buy permits on auctions or
install sulfur dioxide scrubbing technology depending on their own calculations of the
relative economic advantages of each move. The power companies would then have a
maximum bid price which represented to them the point below which it was
economical to avoid the installation of the new technology; if the price went over that
number, that company or plant would then, it was assumed, be prepared to invest in the
scrubber. As it turned out, sulfur dioxide reduction occurred because of the availability
of lower sulfur coal from the Western U.S. at a cheaper price rather than the permit
auctions incentivizing the installation of emissions scrubbers. Additionally, the new low
sulfur coal increases net global warming over dirtier coal as sulfur dioxide emissions,
produced by coal impurities, are in fact a negative climate forcing (i.e. cooling), so
cleaner coal fuel leads to slightly greater climate warming overall though less acid rain.

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Even if the decision to source coal from the Western U.S. had occurred due to costs
imposed on power plant operators by the cap-and-trade instrument, the analogue
between reducing sulfur dioxide emissions and reducing greenhouse gas emissions is
strained. Decarbonizing the electricity sector or the economy as a whole will involve
multiple changes and investments that are dependent upon each other by widely
dispersed economic actors both public and private. Simple fuel-switching with existing
equipment will not suffice. For instance, to eliminate global warming pollution in
electrical generation, it will require a series of interdependent investments in new
transmission that links existing grid coverage areas, new generators, as well as
mothballing old generators or alternatively the emergence of new types of supply such
as distributed generation which would compete with the utilities participating in the
permit auctions. Less certain would be the development of a new generation of safer
nuclear power plants at some point in the future, though this too is inconceivable
without government support independent of carbon pricing policy. To eliminate global
warming pollution in transportation will involve still more intermediate investments,
involving electrical supply to or near the vehicles that will move people and goods. The
possibility that public sector investments would be required in this process, largely
unaffected by permit auctions or prices, makes the cap-and-trade policy more of a show
than a direct route to a zero-emissions infrastructure. Furthermore, the requirement
now is for us to start building a zero-net emissions infrastructure as this process will
take decades. Contrary to this goal, the incrementalism of cap-and-trade is a recipe for
investment in incrementally lower emissions solutions or delay of the building start for
zero-net carbon emissions infrastructure.

Emissions trading specifically (as opposed to the carbon tax/fee version of carbon pricing
that also depends on the assumption of Homo oeconomicus) rests on a type of self-
interested behavior that is typical of our current economic era but is wholly
inappropriate to the task of rebuilding the physical infrastructure of society. With a
design inspired by the credulous wonder of neoliberal/neoclassical economists, as they
gazed upon financial traders and the supposed efficiencies of financial markets, emissions
trading contains within it multiple invitations for take-over by financial traders that have
only very short term gains in mind. The focus on short-term gain of financial traders, a
product both of their increasingly parasitic role and lack of engagement with the
fundamental businesses from which the financial products they trade derive, contradicts
the need for economic actors to focus on large-scale multi-year investments in real
assets and long-term benefits of those investments to cut carbon.

While academic economics institutionalizes Homo oeconomicus as normal within the
precincts of economic theory, to assume people are only self-interested also is one of
the more common rules of thumb for assessing the behavior of others that one
encounters in business and political settings, beyond the jargon of academic economics
or utilitarianism. This attitude with or without academic justification however, is, in the
end, a support for cynicism and widespread sociopathic behaviors in any institutional or
business setting, so is ultimately unsustainable as a consistent and universal social
philosophy.

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Homo oeconomicus, while it seems like a hard-headed realistic model or assumption
about human behavior, turns out to have shaky theoretical and empirical foundations.
Actual cost-benefit maximization as posited by neoclassical theory, i.e. computing all
possibilities and picking the most advantageous, as Reinhard Sippel showed via a simple
experiment, is an impossibility. One line of psychological research has shown that
people are as likely to be satisficers as attempt to be maximizers that the tendency
to maximize is a trait present in varying degrees (i.e. one can have more or less of
it) not an invariant condition of humanity. This means that many people will attempt to
gain enough advantage to themselves but not necessarily try (always vainly) to
maximize it. Furthermore people are not only set on gaining personal advantage but
also on cultivating relationships with others, that we are in fact Homo socialis more than
asocial hoarders of advantage. Additionally, people act often, out of concern for others
and sometimes even selflessly, though this is not always the case.

These empirical observations have not caused mainstream economists to rethink their
models of human behavior that assume utility maximization and methodological
individualism. Perhaps this is because they believe that these models are good-enough
approximations of behavior on the level of the individual that nevertheless, in aggregate
suffice to make their models of larger scale institutions and phenomena valid. However,
recent history has shown that mainstream economics larger-scale modeling is next to
useless, especially in dealing with crises. Only a few economists predicted the Great
Financial Crisis of 2007-2008, of which economists should have been well aware if they
had not been beholden to dogma and the financial interests profiting off the debt-fueled
housing/asset bubble. In some sense, the assumption that everybody is a maximizer
naturalizes and excuses the greed and excess that led to the recent financial crisis,
thereby making the run-up to the crisis invisible to most economists as it was happening.

While not supported by empirical observation as a universal rule of thumb to describe
human behavior, the construct of Homo oeconomicus fairly accurately describes an ideal
type and role within monetary capitalism that could be called the microeconomic
accounting role. The microeconomic accounting role is that range of mental
orientations and observable activities by actors in the private sector, both businesses
and households that target as a goal to have a greater monetary income than monetary
costs to them over a period of time. Those who seek to increase the amount of their
income over their costs are to a lesser or greater extent pursuing or conforming to the
ideal type of the utility maximizer, though there is a wide range of degrees of effort into
which individuals and organizations put into this accounting activity, therefore
maximization is an inaccurate empirical description. Though within larger businesses
there are people who specialize in microeconomic accounting, i.e. accountants, it can be
argued that in a successful business many in the organizations leadership internalize to a
lesser or greater extent the microeconomic accounting role. If the only role or capacity
of individuals is believed to be microeconomic accounting, then greed is as good a
description as any for that individual and organizational motivational system.

The current neoliberal political-economic orthodoxy attempts to deny that there is any
other type of accounting, or really any political-economic decision-evaluation process,
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beyond microeconomic accounting. The advocacy and practice of fiscal austerity, the
current and most aggressive version of neoliberalism, denies that what might be termed
macroeconomic accounting, the budgeting and political-economic decision-making
process of monetary sovereigns, exists. Macroeconomic accounting, a political-
economic process that occurs in legislatures and among government executives, must at
some point in the business cycle take into account or react to among other things the
limiting case of the paradox of thrift. Allowing for the paradox of thrift, in which the
simultaneous impulse to save by private actors leads to a shortfall of demand,
households and businesses alone striving to follow the microeconomic accounting ideal,
i.e. maximizing income and minimizing costs to themselves, cannot effectively govern the
economy as a whole or create prosperity.

While advocates of austerity and neoliberalism promote the belief that there is nothing
but microeconomic accounting and demand that governments use the accounting rules
of businesses and households, they inevitably, if they seek to run a sound economy,
must break with their ideology in practice, if not in theory. As governments around the
world discovered in the Great Depression and only temporarily after the Great
Financial Crisis, a monetarily sovereign government cannot afford to follow the rules of
microeconomic accounting. After an initial period of Keynesian emergency measures
after the Great Financial Crisis, the dogma of fiscal austerity was deployed in the US in
2010 to prevent a thorough re-learning of the lessons of the Great Depression, i.e. that
governments must manage capitalist economies actively via fiscal and monetary policy or
the result will lead to collective ruin. The austerity drive has so far been relatively
successful in preventing this re-learning while simultaneously imposing needless suffering
and protecting the ruling financial industry elite from accountability.

The deficiencies of mainstream neoclassical economics are numerous and not all can be
easily traced to the unrealistic assumption of Homo oeconomicus, or the denial by many
influenced by neoclassical economics of the necessity for a macroeconomic accounting
by governments, distinct from the financial operations of businesses or households. But
it is safe to say that there is enormous institutional inertia in economics as attachments
to assumptions and models have led it become an otherworldly affair. Most mainstream
economists operate with assumptions that divorce them from the realities of the
economy, leading to the professions aforementioned disastrous performance in
predicting economic crises as well as leaving the profession almost completely
unprepared to face the upcoming climate catastrophe. However this has not yet
diminished the influence of mainstream neoclassical economics in one or another of its
versions, including neoclassical environmental or climate economics, upon government
policy. Economics, unrealistic and unsuccessful as it as a descriptive or predictive
science, remains the master discipline of how government policy is structured, for a
variety of reasons too involved to go into here.

An outgrowth of the assumption of the human being as Homo oeconomicus is the
accompanying assumption by economists and economic policymakers that markets are
the natural state of the economy. In the past 40 years, the idea that markets
represent the core of the human condition itself has been promoted by the neoliberal
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political-economic philosophy, which is a worldview that is based in part on assuming
human beings are essentially or in practical terms Homo oeconomicus. In neoliberalism,
markets are viewed to be infallible while government is considered to be the nexus of
fallibility. In following the neoliberal philosophy, various policymakers, nominally from
different parts of the political spectrum, have slowly and/or rapidly undermined the
integrity of government institutions and sought to replace them with market
institutions or public-private partnerships. The central neoliberal policy idea is that
goods and services are of necessity better delivered by the private sector rather than
the public sector. Originating from the right-wing in the 1970s and 80s, neoliberalism
is now the dominant government philosophy in most political parties from the Right to
parties that used to be of the Left.

Despite its political dominance, neoliberal leaders have a wretched record of
management of the economies of the developed world, leading currently to mass
unemployment and income inequality not seen in 80 years or more. The net effect of
neoliberalism has in these economies been the hegemony of private finance and the
banking sector over the economy at large. Neoliberalism has proven to be largely blind
to the needs of the real economy, meaning manufacturing and delivery of services
with the exception of encouraging the development of bespoke and high-end services
that target those with high incomes, an outgrowth of rising income and wealth
inequality. Neoliberalism only cemented its political dominance and therefore complete
dominance over economic policy in the 1990s when parties of the nominal left,
including the U.S. Democratic Party and the British Labor Party, became controlled by
factions committed to neoliberal ideology. These socially liberal neoliberals sought in
one way or the other to emulate the right-wing founders of neoliberalism in their
economic policies. Electorates thus since then have had little or no choice between
political parties in terms of their fundamental economic orientation, as fanciful and
ineffective as that orientation has turned out to be in terms of improving overall social
welfare. By creating two flavors of neoliberalism, public sphere debate on
fundamental economic issues largely disappeared and neoliberal policy could be
implemented unchallenged and leaders held unaccountable for its actual success or
failure.

It is then a particularly unfortunate confluence of events for humanity that during the
time when climate policy was first formulated and implemented that neoliberalism with
its accompanying reliance on neoclassical economics and its Austrian sibling-tendency,
were and are the dominant political-economic ideology among policymakers. To act on
climate change means instituting large qualitative and quantitative changes in the physical
infrastructure of society, the domain of the real economy. Neoliberalism has prove
itself particularly inept in developing manufacturing and infrastructure as the critical
elements in these areas are usually functions of government industrial policy or public
spending on infrastructure. These are areas which neoliberals claim are better served
by private actors in supposedly free markets, an economically erroneous idea that
serves as cover for reinforcing the relative power of speculative financial elites over
government and over society at large. Additionally, free trade ideology interferes, in
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the Anglo-American world at least, with attempts of governments to build up or
preserve manufacturing assets.

3. Government and the Moral Force of the Human Community

In banishing government from its model of the ideal society or economy, neoliberalism
lames the ability of a nation, or humanity more generally, to act according to its own
accepted moral precepts, community norms, and best practices. The effort to separate
markets from government oversight during the neoliberal period has led to a weakening
of the ability of the broader community to enforce laws, leading to regulatory failures in
a number of economic sectors, most noticeably in the financial sector. Neoliberalism
assumes the formal distinction between economics and the original term for the
discipline, political economy, in which a combined economy plus the
polity/government were the objects of study of the process by which human beings
transformed materials from the earth for their own benefit. While the notion of
economics as a separate or successor discipline to political economy has been
inscribed in the current terminology used in academia and the public sphere more
generally, this decision and social practice are now resonating in ways that have
unforeseen consequences for humanity.

If we assume, more realistically, that there is as a fundamental social construct, a
political economy and a related academic discipline, the role of politics and the ethical
ideals that may motivate political actors and political movements are much more likely
to be included in a description of the functioning of the economy. If instead, as we are
in current discourse, dealing with economics and an economy that is intellectually
isolable from politics and the ethical strivings of people, then the ethical element of
human community life and the economy is isolated from how we think about economics
and design economic or climate policy. Critically important, real-world economic
decisions are made in political institutions that have profound effects; many of these
decisions are based on interpretations of ethical principles filtered through the degree
to which that government is corrupted by the influence of monetary gain for
officeholders, this level of corruption itself an expression of the ethical priorities of a
society in practice. While the concept of political economy may mislead some into
thinking that the economic aspect of the political economy is precisely malleable to
political will and purely the practical expression of ethical ideals, which it isnt, the
specific points of integration and articulation between the polity and economy should
have a home in the social sciences and in public discourse.

But the moral challenges of regulating a fair and equitable economy pale in comparison,
though are by no means replaced by, the ethical challenge of climate change where the
current and immediate past generations in the developed world have endangered the
viability of the world for future generations and, more immediately, for many of those in
the current generation in parts of the developing world. As has been the practice of
policymakers and pundits, deploying interpretive frameworks from neoclassical
economics isolated from an understanding of the role of political institutions and the
ethical bases of the community which then becomes the actual practice of climate policy
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is itself an ethical lapse or violation as well as an exercise in futility. The ethical violation
of mistaking climate change for a (narrowly neoclassical) economic problem is one that
is perhaps difficult to notice as we have been told that economics is a social science
and therefore an accurate description of reality. However what is taken to be scientific
or semi-scientific economics is for a number of reasons explored here and elsewhere
not as reliable a depiction of reality as is assumed, even without our taking into account
the immediate crisis and danger posed by our disruption of the earths climate.

4. Existing Climate Policy Is Lacking a Drive Axle Between Ethical
Impulse and Policy Implementation

The decision in the 1990s to turn over climate policy to market mechanisms, in
particular emissions trading, was framed by supposedly objective economic
assumptions based as outlined above on the idea that people are essentially, Homo
oeconomicus, i.e. act in practice as if they do not consider, among other things, the moral
dimension of life, are utility maximizers and are essentially divorced from their
community of context or the community of all human beings more generally. The
Kyoto Protocol and its various progeny including the European Union Emissions Trading
Scheme (EU-ETS), the Northeastern US Regional Greenhouse Gas Initiative (RGGI) and
Californias AB 32 cap-and-trade system, all hand off implementation of the intention
to reduce climate change to a constructed carbon permit market, layered above the real
markets for goods and services.

Explicitly in the rules of the carbon markets are injunctions to market actors to limit
their focus to cost-effective solutions to climate change with also the provision within
the policy framework of many ways to circumvent immediate or even longer term
efforts to reduce or cut emissions-intensive activities of the firm or organization
involved in the emissions trading system. The purchase of offsets, widely criticized but
integral to most emissions trading systems, places the stress in these systems on the
potential of actors for maintaining or increasing their economic gains without an
enforcement of duties that they may have to the greater community, let alone the future
of humanity as a species. Furthermore a group or community perspective on changing
the way of life or economy to use less carbon is left entirely out of the parameters of
the policy instrument. Portrayed by its advocates and assumed naively by others to be
the worlds expression of climate virtue and needed social transformation, a cap-and-
trade system had none of the policy focus and instruments to transform in a rapid and
wholesale manner, society and its use of energy and land, as it does not recognize the
critical element of the social and group nature of the structure of human communities,
as well as the institutional expression of our social nature in the form of governments.

Defenders of cap-and-trade/emissions trading like to claim that regulators and
government officials are given certainty over the quantities of emissions by the cap-
and-trade instrument because they control the quantity of permits available, as against,
in the competing carbon tax instrument, just setting a price on emissions and allowing
market actors to work from there. But cap-and-trades claimed control over quantities
of emissions via the use of permits for quantities of pollution is illusory given the loose
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or faulty control that regulators have over carbon markets by design. The notion that
somehow, after allowing traders to supposedly cut emissions during the normal
functioning of the policy, that suddenly, if polluters neither purchased permits, offsets
nor cut emissions, regulators would shut down a particular plant or an industry
segment, contradicts the entire modus operandi of emissions trading, at least as it has
been sold to the market participants. The control over quantities of emissions claimed
by cap-and-trade advocates is simply a fondly repeated prayer given the actors who are
empowered by the system, namely the incumbent polluters and carbon traders who
determine the focus of the markets and have inordinate influence over the regulators
themselves. A chronic problem of the marquee EU-ETS cap and trade system has been
the laughably low cost of its permits (around $3/tonne) due to oversupply, and
therefore an almost non-existent push to cut carbon from the side of the policy.

As it turns out, the most famous regulatory experiment based on the assumptions of
cap-and-trade failed spectacularly where government officials thought they could control
quantities rather than price via a simple regulation of markets. The monetarist
experiment of the 1980s in which the Federal Reserve thought it could control the size
of the money supply rather than the price of money, i.e the interest rate, was eventually
abandoned after its miserable failure to actually control the money supply in a way that
was not disruptive of the economy. Some claim that the high levels of inflation of the
1970s, despite the increase in the money supply, was reduced because of this policy,
though, a deep and damaging recession caused by the policy, reduction in real wages of
working people, and a decline in oil prices seem like more likely proximal causes. If it
were not yet clear that the theory of the policy (controlling quantities directly from a
central regulatory point) was entirely wrong, since that time, the Fed no longer targets
quantities of money and simply sets the price.

Working within the assumption that the economy exists independent of governmental
institutions, the regulatory experience of the Federal Reserve Bank of the 1970s and
80s would be an argument for a carbon tax as the more effective way to control
emissions by assigning a price to them without the need for a sudden enforcement of a
cap after months or years of laissez-faire, the equivalent of the deep and damaging Fed-
created recession of the early 1980s. One nominal difference between emissions
trading and carbon taxes is that in the carbon tax/fee framework, price becomes the
only instrument to control emissions rather than in emissions trading, the emissions cap
is additionally this rather fanciful and spectral hammer that might, but is exceedingly
unlikely, to come down on carbon polluters. However both emissions trading and
carbon tax/fee systems, if implemented as the central or sole climate policy, share the
problem of relying on unplanned atomized, self-interested action in markets alone to
shape the future zero-carbon society.

Ultimately, even if a central focus on carbon pricing and market regulation were
appropriate to the climate challenge, the driver for effectively instituting any of these
policies, any climate policy, is allotting a central place to peoples and leaders ethical
commitment and a desire by national and the international communities to preserve the
world for this and future generations. Underlying this orientation would be a self-
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understanding of our species as beings that live in communities with social institutions
and physical infrastructure that are largely shared, the social terrain within which that
ethical commitment would be made operational. The notion that climate policy strips
away the polity and the realm of potential moral action and only perceives in practical
terms an amoral, individualized economy, breaks from the outset the transmission
belt, the drive axle for a rigorous-enough and effective-enough policy. What is at
stake is the priceless survival of the human species and of future generations, to which
cost effectiveness to individual households or firms and the opinions of market
participants about the financial price of carbon for their own accounts can only be
subordinate concerns to the real current resources and real abilities of our species to
rescue itself.

Discussions of climate policy over the last decade have revolved around the choice
whether one is for emissions trading or, on the other hand, some version of a carbon
tax. Both emissions trading and carbon taxes, if pursued as the sole or central policy to
pursue climate policy involve a hand-off to Homo oeconomicus in markets of the
implementation of climate policy. This hand-off in turn, diminishes or obscures entirely
a potential focus on the transformation of the shared social, energy, and transport
infrastructure upon which society and markets are based.

An actually-effective climate policy would in its entirety not break the drive axle of
climate policy but a component of that actually-effective climate policy discussed in a
section below would be a carbon tax. It appears, for instance, in British Columbias
modest carbon tax and dividend program, the tax has added a mere 25 cents to the cost
of a gallon of gas, but in combination with a moral and informational appeal to gas end-
consumers has had significant effects on emissions. As a tax or fee is tied to
government and our individual obligations to the regional or national community, it is
preferable as a component of climate policy as it integrates with our moral obligation to
cut our carbon emissions better than emissions trading. However, contrary to the
views of carbon tax-only advocates, a tax is only one component of an effective carbon
policy.

5. An Example: James Hansen and Carbon Pricing

The climate scientist and now activist James Hansens preferences in climate policy and
the evolution of his views tell us something about how social science categories and
disciplinary boundaries have misled policymakers and climate policy advisors, among
which, in the latter group, we can count Hansen. James Hansen has had a pioneering
career in climate science as well as in educating the public and policymakers about the
findings of climate scientists. Furthermore, Hansen has had a primary role in alerting the
public and the policy elite both in the United States and around the world to the
dangers of climate change: the famous Senate hearings in 1988 about global warming
revolved around Hansens testimony.

Furthermore, Hansen is very much aware of the ethical issues that surround climate
change and has written a book about the critical intergenerational ethical issue (Storms
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of My Grandchildren) surrounding climate change. Additionally, after his retirement
from NASA where he spent much of his scientific career, Hansen has devoted himself
full-time to climate activism, including, though not limited to, getting arrested at protests
against the building of the Keystone XL pipeline and other fossil fuel infrastructure
projects.

Hansen has been sharply critical of cap-and-trade as the primary instrument to address
climate change. Hansen has instead shown a preference for carbon taxes or more
specifically what he and others call fee and dividend which is another name for a
carbon tax with a fixed individual refundable tax credit. In some designs of fee and
dividend it is revenue neutral, meaning that the government gives out as much in tax
credits as is collected in tax in total across the entire system, leading to no net intake of
taxes by government overall. The individual refundable tax credit (dividend) would
allow households that do not purchase so much in the way of emissions-intensive goods
and services to earn money via carbon tax/fee program while those who lead a more
emissions-intensive lifestyle would end up spending more money than their fixed refund
via their energy-related expenditures, now more expensive via the tax/fee. The
refundable tax credit represents an effort to redress the regressivity of a simple carbon
tax which would without the tax credit differentially affect the working class and poor,
who spend a higher percentage of their income on energy-related goods and services
than the wealthy. That the tax credit is refundable means that those without tax liability
would simply receive a stimulus check from the government tax authority every year in
the amount of the tax credit minus their tax liability.

Hansen has chosen, in my opinion, the most likely of carbon pricing systems to make
some progress both in terms of political feasibility and also effectiveness, if the per
metric tonne carbon dioxide emissions equivalent is set high enough to curb emissions.
Hansen, like almost all carbon pricing advocates, has maintained that this is a politically
conservative solution that allows the market to decide which energy sources will be
implemented. Hansen, a lifelong federal government employee until his retirement, has
spoken as if this should appeal to both major American parties because it is market-
based. If Hansen were to advocate a central role for government in climate policy, as,
for instance, I do, at least during his employ at NASA, he might appear to be self-serving
as a government employee. In appearance, this seems to be an appeal for his own
independent-mindedness as a policy analyst, his recommendation of a market-based
mechanism shows the appropriate skepticism of the capacity of government to do good
or to be effective that meshes with current neoliberal dogma.

However, Hansen is also a major advocate and increasingly so, of nuclear energy as a
climate solution, putting his faith into newer designs of nuclear plants that may be safer
than existing plants. Hansen does not believe that renewable energy and energy
efficiency can meet energy demand and therefore effectively decarbonizes the economy.
Hansen has been scathingly critical of environmentalists and others who see in climate
action an opportunity to as well, shut down nuclear power plants as an evil or threat in
themselves. He is particularly focused on China, which has a very large population in a
relatively small area, is developing rapidly, has a high concentration of energy intensive
Page 13
industries, and has relative to its energy demand a lower density of sites with high
quality renewable energy (diffuse sunlight in populated areas due to humidity and
smog/not particularly windy). Hansens latest policy recommendations have emphasized
technology transfer and scientific cooperation between the US and other nations to
attempt to encourage the Chinese to develop more nuclear energy more rapidly.

Hansens earlier exclusive reliance in his policy proposals on the market as an impartial
arbiter of the correct climate solution were, of course, based on the fanciful notion
from our current neoliberal political-economic echo chamber that Homo oeconomicus
could decide which energy system would be built once a price on carbon was set. But
as Hansens justifiable desperation grows regarding inaction on climate, he is
recognizing, correctly, that his favored technological solution will not simply be
produced by the uncoordinated actions of market actors to a price on carbon. Nuclear
energy, more than any source of energy for peaceful use, is a creation of public policy
and government subsidy. This observation is not necessarily a condemnation of nuclear
energy if it gives us a chance to preserve a habitable climate but simply an observation of
fact. Hansen seems to be edging towards a policy that would be something like a
nation-by-nation or international energy plan rather than an open market competition
between energy sources, which is fondly-held economic myth anyway about how energy
and other long-lived, capital-intensive infrastructure gets built, especially in short order.

I do not share Hansens negative or dismissive view of renewable energy and energy
efficiency as insufficient to the climate challenge, and I see his views in this area as
reactive rather than well-considered. However, for rapid-enough deployment of
renewable energy and energy efficiency in a systematic way, government investment and
regulatory change is required as well as it is for nuclear energy, so this is not a
distinguishing characteristic, as some advocates of renewable energy like to claim. I am
though, like Hansen, critical of the categorical dismissal of nuclear energy, and
particularly potential innovation in nuclear power, by environmentalists as well as others
who magnify its shortcomings but overlook its past benefits and future potential
benefits. For instance, historically nuclear power has prevented a good deal of carbon
and other pollutants from entering the atmosphere.

However, the trend in Hansens policy positions to go beyond pricing as the only
determinant of climate action is, independent of the role of which zero-carbon solution
he or another analyst favors, heading towards a more realistic climate policy stance.
Such is the power of groupthink about the supposed independence of markets, Hansen
might still today deny that he has now partially exited the markets-only view of how
climate policy should proceed. A sufficiently high carbon price will be an aid to the
market acceptance and growth of all carbon-reduced products and services but he is
right to realize that government policy will help shape many of the available alternatives,
often guided by engineering and scientific analyses of the feasibility and climate effects of
a given design of energy infrastructure. Without this anticipation of the shape of the
zero-carbon energy system that we must start building today, we will never achieve or
approach achieving our climate goals.

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6. Background for an Actually-Effective Climate Policy

Rather than rely solely on price signals for individual or corporate actors in what are
erroneously assumed to be all-powerful and all-encompassing markets, actually-effective
climate policy is a massive societal and institutional movement towards a more
sustainable world with multiple policy components centered around an interlocked
political economy not a (markets-only) economy detached in analysis and cognition
from national and international political bodies and processes. This observation accords
with empirical observation as well as a simple reality check regarding the nature of the
tasks ahead: the climate crisis is upon us and because of its enormous scale, to address
it requires all hands on deck.

Furthermore, actually-effective climate policy draws on human capacities beyond the
ability of (some) individuals to use simple arithmetic and algebra to calculate monetary
gain and loss. Most of us, as human beings, have a moral sense, have highly developed
intellects beyond our abilities to calculate, and also have the abilities to affiliate and
cooperate with others. A range of these abilities must be part of climate policy both for
political leaders as well as for the citizenry at large. In this, climate policy is not too
different from an actually-effective industrialization or full-employment policy, which
require of their designers and implementers more than simply an eye to maximize
income and minimize monetary loss. That recent efforts to create industrial
development or full employment have failed have a lot to do with a dominant ideology
that attempts, like Procrustes, to cut human beings down to a reduced form, Homo
oeconomicus.

Empirically, climate action and, more generally, policies and market actions against
dependence upon fossil fuels after the oil crises of the 1970s reveal widely divergent
responses by national governments and economies, often backed by cultural and
economic trends within different countries. The developed nations that have, since the
1970s, taken the most successful steps in addressing fossil fuel dependence and
lowering per capita and per unit GDP greenhouse gas emissions are mostly Western
and Central European nations and Japan. These nations have also been the most
conscientious in adopting the flawed Kyoto Protocol and have attempted most
vigorously, partially out of honest belief in the policys probity combined with social
science-naivete, to implement the Kyoto protocol in some sectors of their economies.
However these nations successes in reducing their fossil fuel (most particularly oil)
dependence have had little to do with their efforts to adopt emissions trading but more
to do with national planning and determination to reduce oil dependence via both high
energy taxes and policies to spur energy efficiency, renewable and nuclear energies over
the last 4 decades. By contrast, nations like the US, Canada and Australia have, to
varying degrees lagged in these efforts, though the differences in their responses tell us
something about the characteristics of actually-effective climate policy. The US has in
recent years, reduced its per unit GDP emissions by off-shoring its most energy and
carbon-intensive industries to Mexico and China with a lesser version of this trend
effecting the European Unions emissions as well. Also methane emissions in the US are
undercounted leading to no progress in the emissions intensity of the US economy.
Page 15

The countries that have to date most successfully decreased carbon emissions of their
economies per- unit-GDP and per-capita over the 4 decade period have had many of
the following characteristics:

1) Medium to high level of economic development
2) Political legitimacy of government (usually though not always via electoral
democracy)
3) Acceptance of economic planning and dirigisme (leading role of government in
economy) by the population
4) Political commitment to science and values of the Enlightenment
5) Broad social acceptance of internationalism/interdependence of nations
6) Relatively high levels of economic equality (though over the past decade
generally following the current trend towards increasing inequality).
7) Strong social safety net (lowering the stakes for economic failures and setbacks
on individual or familial level)
8) High energy taxes, especially for imported fossil energy
9) High per unit retail prices of fossil fuels or electricity generated using fossil fuels
(often tax driven)
10) Existing low- or zero-carbon transportation system (electrified railway network
and public transportation)
11) Medium- to high-density urban and suburban development (both by design or
historical circumstance)
12) Political weakness of privately- or investor-owned fossil fuel industries relative to
government leadership (i.e. non-petro-states).

An actually-effective climate policy will need to combine many of these characteristics as
a package, requiring at times social and political change simultaneously or before the
physical/technical changes that reduce emissions will occur.

While the above seems like a long menu of diverse political, economic and social
characteristics and therefore policy components, the primary motive force for climate
action is and will be individual and broadly social ethical commitment to the flourishing
of future generations in combination with enlightened self-interest. The above list of
characteristics are either contributing factors to or the result of political leaderships
over a period of years realizing an ethical commitment to the future of the nation as a
whole. National polities and political institutions have been the places historically where
peoples ethical views and those of the broader community have been able to shape the
course of human events and day-to-day living. The renowned heterodox economist
John Kenneth Galbraith and now the Modern Money (MMT) school of political-
economic analysis, call this the public purpose which, however that purpose may be
culturally and politically defined, government policies in their actual practical
implementation serve. A climate policy based solely on the expectation that people are
narrowly self-interested utility-maximizers, i.e. Homo oeconomicus, within the context
of markets will simply reinforce the self-focused attitudes and behaviors that have led us
to the current dire situation where we are destroying the inhabitability of the planet for
Page 16
our own and co-evolved species. Furthermore those policies that hinge on shaping the
behavior of individual actors alone, overlook the critical project of recognizing, analyzing
and then transforming shared, community infrastructure to radically reduce or eliminate
net carbon emissions within the space of a few decades.

An actually-effective climate policy on a nation-by-nation level and internationally will be
a major step in the evolution of humanity towards some new integration of self-interest
and common-interest. Such an evolutionary step is necessitated by the arrival of the
Anthropocene epoch, the geological epoch where human beings can no longer eject the
unintended byproducts of their intended activity into the non-human (as well as the
human) environment without regard for the consequences.

The advantages accruing to our species for their dominance on the face of the earth
come with disadvantages which are only now being reckoned with by large swaths of
humanity. One of those disadvantages is the ability of humans to wipe themselves out
as an organized social species, i.e. a civilization or, somewhat less likely, our ability to
wipe ourselves out as a species entirely. There are those who would like to look away
from those costs or disadvantages, in some cases denying their existence. These tend
to be believers in the ideology of free markets that are premised on an agnosia
(not-knowing) of the crucial physical inputs and (intended and unintended) outputs into
the success of economies and markets. There are others who, as in the first wave of
climate policy, want to consign climate policy and action to a familiar realm which does
not challenge currently dominant categories of thought (i.e. the neoclassical economy
that exists separately from the polity) or does not challenge dominant social groups
(defining climate policy as transforming the right to pollute as a tradable commodity on
markets to please the financial elite).

An effective climate policy is based then on both human acquisitive and self-preservative
impulses, privileged by mainstream economic theory and related philosophical schools,
as well as upon individuals sense of duty to others and to future generations.
Alternatively, if these higher impulses are not currently top of mind, an effective
climate policy allows for these impulses to be developed and integrated into climate
action in the future, i.e. there is room for them. The achievements of civilization, where
government and other institutions come to represent a portion of the moral strivings of
the community as a whole, are key components of the large-scale climate solutions
prescribed by the policy, not left out of them or taken as invisible givens. A model of
climate action without the instruments of national governments and international
intergovernmental bodies integrated in its model of society, is ultimately a model
without a chance at effectiveness.

7. Outline of An Actually-Effective Climate Policy

Actually-effective climate policy, which might be called a comprehensive climate and
energy policy, then has the following components:

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1) National Carbon Mitigation Plan: National carbon mitigation plans (reduce
emissions of greenhouse gas emissions to zero or below) commissioned by
individual governments that outline the high-level designs of a zero-net-carbon
infrastructure for projected 2050 energy and transportation demand in a
particular nation. Such plans should assume no technological breakthroughs but
deployment of existing technologies or foreseeable successor generations of
these technologies. For each nation these plans will look quite different
depending on existing infrastructure, natural resources, cultural preferences, and
geography. The plan will include targets for carbon mitigation via land use
changes and energy conservation. Such climate plans should include alternative
technological and land-use scenarios which would also estimate the carbon
emissions required to build those various scenarios. A scenario with the highest
likelihood of success (defined below) would be chosen first with regular check-
points built-in for progress as well as preparation for fall-back scenarios in case
of bottlenecks closing down paths and new developments opening up new paths.
Such a plan will need to be built around durable social values, ensuring its
resilience to both natural and man-made challenges and changes. In-built into
planning would be a no-regrets policy, if in the face of well-tested innovations,
substantial changes will yield a better social and environmental outcome.
However, implementation of the plan cannot be shelved or delayed on the basis
of speculative claims of improved outcomes by pursuing new and untried
innovative technologies.
2) National Carbon Budget: The effectiveness of the plan will be measured
according to achieving milestones that are successively smaller tranches of a
national carbon emissions budget that in total are harmonized with international
carbon budget goals. The current (generous) budget of the UNs IPCC is that
we as a species will need to emit less than 469 gigatonnes of carbon dioxide
equivalent (equivalent means accounting for other greenhouse gas emissions
including methane in the budget) to remain below 2 degrees Celsius (ca. 3
degrees Fahrenheit) warming. Keeping warming at lower levels and remaining
substantially below budget is preferable. Via a political process this number
would need to be divided between nations ideally based on population, but
realistically including, current emissions intensity (and therefore the distance to
zero net emissions), assuming the latter means that this emissions intensity is
paired with current economic benefits. The degree to which current emissions
by one economic sector or another are being used to produce goods and
infrastructure that will cut emissions in the future has not been widely discussed
but must be taken into consideration in developing this climate policy (i.e.
embedding or transforming of carbon emissions in durable infrastructure on
the path to achieve zero-emissions).
3) Yearly Carbon Budgets: The rate at which those annual tranches of allowable
emissions decrease year upon year will depend on the degree to which:
a. Emissions-intensive investments in infrastructure are concentrated earlier
or later in the plan
b. The timing and size of such emissions investments balance out with
reduced emissions in subsequent years.
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c. The degree to which technical innovation can be anticipated in the future
that will reduce the emissions-intensitivity of the use of concrete and
steel.
d. The degree to which conservation and even geoengineering processes
can reduce carbon in the air, buying time for reconstruction or enabling
deeper earlier cuts
4) Coordination of International Efforts to Address the Global Climate
Crisis: My proposal/projection is that nations must craft their own individual
carbon mitigation and adaptation plans but nevertheless, at some point in the
process, coordinate or harmonize with other nations to create effective
international agreements under the auspices of the UN. As proposed below in
Policy Drivers, this international coordination will at first be an uncoordinated
bottom up movement of those nations that are most concerned or effected by
the climate crisis imposing carbon tariffs on imported goods. Eventually such
unilateral actions will spur a process where effective multilateral deals can be
formed that do not compromise the efforts in individual nations to create the
necessary zero net-carbon emitting society that is required for limiting damage
to the ecosphere upon which all nations depend..
5) Climate Adaptation Plan: Alongside a climate mitigation plan, given the
trajectory of warming and expectable climate effects, a climate adaptation plan
will need to be put in place that prioritizes which investments are needed to
address the oncoming effects of climate change without endangering the massive
effort to address the root cause of those changes, i.e. mounting emissions and
greenhouse gas concentrations. Adaptation includes responses to sea-level rise,
species extinctions, drought, flooding, weather-related disasters, and water
shortages. As monetarily sovereign governments are not constrained by financial
concerns but are constrained by real limits in natural, human, and existing
cultural-material resources, the balance of adaptation vs. mitigation (the higher
priority) will revolve around how to find as many synergies as possible in a
combined effort to protect people now and to protect them from future
disasters. One promising area, perhaps exceptional, is the potential of offshore
windfarms to reduce the intensity of storms while producing zero-emissions
electrical power. Beyond these, some painful and unpopular tradeoffs will
probably be necessary, devoting resources preferentially towards ultimate
causes.
6) Geo-engineering Research and Technology Evaluation: Further
consideration and research into geo-engineering plans and technologies as a
subordinate to, not a substitute for, reduction of emissions and leaving fossil
fuels in the ground. Geo-engineering is generally defined as a proposed
technological process that is meant to directly cool the earth or directly remove
carbon from the air. Some types of geoengineering, like increasing the
reflectivity of manmade surfaces like roadways and roofs are considered
uncontroversial. More controversial types of geo-engineering, such as air
capture, encouraging plankton growth, or cloud brightening have been
treated by some as an implied license to emit carbon which would never justify
its development or use. However, any effective climate plan is also an effort at
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geo-engineering in the broad sense of asserting human control over the
concentration of human-emitted greenhouse gases in the atmosphere and global
temperatures. The side-effects of geo-engineering schemes will need to be
reviewed as a means to buy time for building a zero-emissions society, a process
that itself involves emissions. Considered outside of a massive effort to cut
carbon emissions, geoengineering processes with foreseeable but unintended
disruptive potential for ecosystem functioning or those that divert substantial
real resources from mitigation efforts are unacceptable, unethical and potentially
criminal.
7) Voluntary Energy Conservation: Promotion of voluntary energy
conservation efforts within government and the private sector (households and
businesses) through a combination of moral appeals, social recognition, building
of enabling infrastructure and institutions (low or zero-emissions public
transportation, bicycle and walking facilities, urban and suburban densification,
telecommunications and telepresence facilities, ride sharing and carpooling) and
incentives.
8) Revision of Social Contract: Restructuring the social deal between
government and the population to cushion ordinary people from the effects of
the transition period to a zero-net carbon emitting society. The hardships of the
transitional period may involve reduced access to or higher costs of
conveniences, emissions-intensive pastimes, planned or unforeseen shrinkage of
some economic sectors, and a planned degrowth of emissions-intensive
sectors of the economy or perhaps the entire economy in GDP terms. The
deal would include guaranteed access to jobs at a living wage via mandated job
guarantee, guaranteed access to job retraining and continuing education for new
job roles, guaranteed health care, and increased Social Security payments/public
pensions for retirees. Additionally, targeted subsidy and infrastructure building
programs will focus on stabilizing prices for food and water supplies and, as part
of the main carbon mitigation efforts, energy costs per household via efficiency
retrofits and conservation efforts. Reviving or constructing new local cultural
institutions, downtowns, and community centers will help people re-develop
local culture and reduce the demand for long distance travel for entertainment.
9) Carbon Mitigation Policy Drivers: Surveying the requirements in the
national climate plan, policy drivers will be put into place to implement the plan
(this is the reverse of carbon pricing/emissions trading advocates who allow the
policy driver to dictate the shape of the future society). Deciding on the general
type of policy drivers required will involve some a priori decisions based on a
reality-based assessment of which goods and services will be best provided or
funded by government, those that will be delivered and/or funded by the private
sector, and those that are some mixture of the two. The notion that one would
consider equally the delivery of goods and services by the public sector
contradicts the current neoliberal orthodoxy which has lamed existing climate
policy proposals. In the case of the US, the provision of key pieces of electrical
transmission infrastructure (a supergrid to enable exploitation of onshore and
offshore wind and solar resources) and electrified rail infrastructure as well as
urban infrastructure for denser and climate-resistant development would be key
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components of governments responsibilities. The decisions in this area will
necessarily be the result of a political process but ultimately economic
constraints will necessarily intervene: the household sector will not have the
means to pay the corporate sector to build these massive projects via use fees
and some must be provided by governments ability to spend on deficit. Likely
policy components include:
a. A $100/metric tonne carbon dioxide equivalent carbon tax/fee, ascending
on a yearly basis by $10/metric tonne levied on all fossil fuels according
to their carbon content with a fixed per-person rebate (dividend) to
counteract its regressivity (differential impact on those with lower
incomes) and provide an income supplement for those who use less
carbon-intensive goods and services. A carbon tax or fee on livestock
emissions will start at $20/metric tonne carbon dioxide equivalent and
ascend at an equal rate.
b. Harmonized carbon tariffs imposed on imported goods for which no
equivalent level of carbon tax or price has been levied in their country of
origin. Such tariffs may be adjusted by an exporting nations level of
development, so as to allow for greater permissiveness to emit for less
developed countries. Ultimately such an approach may lead to the step-
wise development of an international carbon deal and internationally
harmonized carbon tariffs, though building from the individual initiatives
of nations most committed to climate action.
c. Government planning and funding of key pieces of zero-net-carbon
infrastructure, including electrified railway build-out, high-voltage
transmission networks for renewable energy. The assignment of these
projects to the public sector have to do with providing consumers and
businesses with lower use fees for the electrical and transport services
than would otherwise need to be imposed by private sector actors who
would have to recover the financial costs of building the infrastructure
plus profit.
d. Federal government subsidies of regional and local public transit capital
infrastructure projects for electric-drive vehicles (battery electric bus,
light-rail) as well as operational subsidies to increase frequency of public
transit, which would decrease as the ratio of costs from fare-box
revenues increases with higher utilization.
e. Feed-in-tariffs which guarantee cost recovery plus a reasonable profit for
household, cooperative, and business investments in renewable energy
electric generators. Feed-in-tariffs are paid for via a surcharge on the
rate-base, which while raising the price of electricity per kilowatt-hour,
encourage energy efficiency and conservation (i.e. using less kilowatt-
hours).
f. Incentives for non-carbon energy storage and direct use of renewably
generated electricity on site (reducing demand for fossil energy from the
grid).
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g. Investment tax credits for the building of new or retrofitting existing
buildings to the Passivhaus (passive house) standard to reduce building
energy use by 50-80% depending on climate zone and building use.
h. Investment tax credits for appropriate use of renewable materials like
wood in construction and durable goods to reduce use of high emissions
materials like steel and concrete and fix carbon via sustainable regrowth
of forests or plant matter.
i. Revision of zoning codes to encourage urban and suburban density and
transit oriented development. Federal government subsidies for local
governments to build public amenities in transit-accessible central
places.
j. A government employment program that guarantees employment and a
living wage for all those willing to work, deployed in part to tasks such as
reforestation and assisting with energy retrofits where the private sector
does not provide services or has inadequate resources to meet the
demands of the national climate plan and the incentives it puts in place.
k. Increase in government funding of research and development of zero-
carbon energy generation, storage and efficient utilization/energy
efficiency.
l. Foundation and funding of a zero net-carbon agricultural prototype
program. Scope would include agricultural machines, transportation,
breeds of plant, animal, cultivation and land management techniques.
Subsequent build-out of necessary infrastructure to create zero net
greenhouse gas emissions from agriculture.
m. Funding a national, or joint funding of an international, program of testing
of safer, proliferation-resistant nuclear fission reactor prototypes to
generate electricity, especially those reactor designs that utilize nuclear
waste for fuel.
n. Continued funding of international efforts to develop a feasible fusion
reactor.
10) Stepwise, Orderly Liquidation of Fossil Fuel Industries and
Infrastructure: An effective climate plan is and will continue to be with high
probability a political-economic confrontation with the fossil fuel industries, even
as they know and may wish for, a simple, low value carbon tax as a sop to
climate action. Rather than an all of the above energy policy, climate action
necessitates a disfavoring of fossil fuels and a favoring of non-fossil alternatives.
Instead, depending on the nation involved, climate action means dismantling the
political and economic might of the fossil fuel industries by isolating their political
representatives, political influence campaigns and lobbyists as well as bringing to
light their preparations to profit from fossil fuel use beyond the constraints of
carbon budgets. In countries that might qualify as petro-states, a category which
includes incipiently the United States and Canada, this process will be more
involved.
a. Removal of All Fossil Fuel Subsidies - While the ideal of a free,
unsubsidized market in the primary energy for society is a harmful
economic fantasy, the continued subsidization of fossil fuel extraction and
Page 22
processing contradicts the highest ethical priorities we have as a society,
including the limitation of damages to the climate system. As in this
climate policy proposal we should subsidize what has positive knock-on
effects and remove subsidies from and tax those economic activities that
impose high costs on society and the environment.
b. A 5% Surtax on Capital Gains from Fossil Fuel Investments-
Trading of investments in fossil fuels will be disincentivized by a 5%
additional tax on capital gains associated with sales of stocks in companies
that are primarily involved in fossil fuel extraction, refining, transport and
sales.
c. New Fossil Fuel Transport, Processing and Delivery
Infrastructure Ban In the United States and elsewhere, various parts
of the fossil fuel industries are expanding their infrastructure in the hope
of extracting all of their fossil fuel reserves, including the more difficult
raw materials that require more effort to remove from the ground as
well as process. An effective ban would halt this process. If after such a
ban, supplies of these fossil fuels were to become limited in a way that
impairs the process of decarbonizing the economy, the ban could be
partially lifted. Such a ban makes sense in combination with immediate
conservation measures that could cut demand for fossil fuels by 30% or
more. Such a ban would not cover the replacement of existing facilities
to comply with safety regulations.
d. Fossil Fuels Exploration Ban As above, this ban would put a halt on
activities like fracking or deep-water drilling but could be partially lifted if
for some reason critical shortages developed. An anticipated reduction
in supply could be met as well by conservation measures and therefore
makes the most sense in the context of a concerted national plan.
e. Fossil Fuel Infrastructure Liquidation and Brownfield
Remediation Plans The fossil fuel industries are leaving and will leave
large industrial facilities as well as large polluted areas in its wake, as their
business is liquidated in an orderly manner over the next couple decades.
In one likely scenario, the industry will after the institution of a serious
carbon policy be abandoned by investors and be unable to both funds it
operations and remediate its environmental liabilities. Government may
have to nationalize, run, and eventually dismantle and remediate the rump
industry as we make the transition to clean energy. A requirement of
continued operations in the beginning of an actually-effective carbon
policy, would be the industry to create a two-decade long plan for the
orderly winding down of its operations, facilities, and invest 10% of its
remaining profits in research into remediating the damages of fossil fuel
extraction, refining, and transportation.
11) Inflation Management and Currency-Stabilization Measures. The
implementation of these plans as well as sustaining other aspects of public sector
functioning during the transition to a zero net-carbon emissions economy will
require large increases in public spending by monetarily sovereign governments
as well as those local, regional or national governments that do not control their
Page 23
own currencies (Euro-Zone countries are notably the latter). While monetarily
sovereign governments are not financially constrained by taxes collected, they
face the potential of spurring inflation or currency devaluation by spending more
than they tax under some economic conditions. This deficit spending injects
more effective demand into the economy for real goods and services that may or
may not become relatively scarce. Furthermore these plans involve increases in
demand for building materials that may become then relatively supply-
constrained in comparison to consumer goods or other components of most
inflation measures. If, in addition, goods and services are imported from other
nations, for which in addition there may be supply constraints as demand rises
for zero-carbon alternatives, the value of the importing countrys currency
influences then the relative price of imported goods. Inflation is not an across-
the-board increase in prices but a constructed measure of basket of goods that
in net decrease or increase in prices. Therefore both currency-valuation and
inflation can be addressed either by supply or demand side measures, specifying
on either side a particular type of good or service.
a. Raising top income bracket tax rates, capital gains, and
inheritance taxes; introducing a 1% financial transactions tax
while these are usually argued for by the current generation of political
progressives as ways to reduce the federal budget deficit or more
realistically as a means to achieve greater social equality, in the transition
to a net zero carbon economy, the reduction of demand via taxation
from top tax brackets will reduce certain aspects of inflationary pressure,
including on capital goods like housing. A financial transactions tax will
remove some of the interest in speculative investments and also reduce
higher incomes and disposable income among higher tax brackets. In
addition, raising these tax rates will increase demand for the green
investment tax credits (in building and retrofitting buildings to a high
energy efficiency standard) to direct private capital to socially productive
uses.
b. Building and Managing Infrastructure for Local Non-Monetary
Economies and Conservation Efforts Non-monetary economies
exist alongside all existing monetary economies and at times of stress and
transition they can buffer the effects of downturns or shrinkage in the
monetary economy. Most notably within households and in
neighborhoods goods and services are created and delivered most often
without monetary exchange. If degrowth in the growth-dependent
monetary economy is targeted, the non-monetary economy would need
to grow substantially if living standards, measured in non-GDP terms,
were to be maintained. These economies also would if effective in
satisfying the populations needs and wishes reduce monetary demand for
goods and services and therefore inflation pressures. However contra
the current idealization in both the technology and the green public
spheres regarding the sharing economy, informal economies can also
be a place of unregulated super-exploitation of the self, of family
members, and the environment, sometimes even harboring slave labor.
Page 24
Without encouraging utopian fantasies about life outside the cash
nexus, providing infrastructure for cooperative ventures such as
community gardens or community centers with cultural facilities will
enable the non-monetary economy to develop but also abuses within the
non-monetary economy to be more easily exposed and remediated. Also
evaluations of the actual climate impacts of the cooperative/non-cash
economy would need to be made, in order to further support its growth
as a climate solution.
c. Taxation of Non-Critical Uses of Strategic Building and
Manufacturing Materials A tax on concrete and steel as applied to
uses not directed at zero- or near-zero net carbon infrastructure or
building would reduce demand for these materials and also drive
construction activity towards critical infrastructure and building projects.
d. Climate Protection Bond Program Similar to the WWII war
bonds program, a bond purchase program would enable a government
guaranteed savings program for individuals that would absorb demand
during the time in which government would be pumping demand into the
economy and postponing that private sector demand to future years.
There is no need for the fiction that this finances government spending
but simply is a guaranteed tax-free savings program that helps the
economy during a critical period.
e. Subsidy of Infrastructure to Support Food Production and Fresh
Water Delivery Keeping food and water accessible during the
transition period will be critically important for a number of reasons,
including the impingement of the effects of a changing climate. A new
infrastructure will be required to maintain access to fresh water as well
as creating food sheds that do not require fossil fuel inputs and minimal
water. Such infrastructure provided by government, while on the one
hand would have a stimulatory effect on the economy but would be
focused on reducing business or local/regional government costs to
deliver food and water.
f. Limitations on Private Lending/Currency Creation by the
Private Banking System It is increasingly being recognized by
monetary authorities, including the Bank of England, that banks create
money and temporary spikes in effective demand in boom times, by
making loans to borrowers. Those who advocate for a steady-state
economy have proposed that endogenous money, the technical name for
banks money creation, is incompatible with such an economy as these
lending practices lead to economic growth that often does not add to
social well-being and an out-of-control ecological footprint for society.
They and others have proposed 100% reserve banking (i.e. banks lending
only as much as they have reserves) as a way to limit this practice, while
then passing liquidity control in the economy fully to government fiscal
policy and the central bank. Despite inevitable political resistance, some
limitations on private banks control of liquidity, be they 100% reserve
banking or other methods, are critically important for currency stability
Page 25
(inflation control and exchange rate control) during a time when we
necessarily will have large scale injection of liquidity into the economy by
government.
12) Non-GDP Measurement/Targeting of Socioeconomic Well-Being -
From a number of different perspectives, analysts are agreeing that economic
target-setting via GDP growth is a key driver of the depletion of the resources of
the earth, including of course the depletion of the buffering capacity of the
atmosphere. The call for planned degrowth is a one proposal to lessen
impacts immediately though is not totally consistent with the project of
transforming society in a durable manner, which would require differential
growth and degrowth of different sectors for the transitional period. In material
terms, the only sustainable solution in the long run would be a steady-state
economy, which would require, though, given the current planetary emergency
in terms of global warming and rapid extinction of co-evolved species, a
transformation of the energy and transport infrastructure and large changes in
land-use and cultivation techniques in rapid order. There are then two periods
within which economic and social progress would need to be measured with I
believe different instruments used for each period. The measures used during
the period of transition would anticipate the future steady-state society:
a. Measurement and Targeting of Socioeconomic Well-Being During
Transition Period - Economic progress will be measured during the
transitional period by meeting carbon budget goals combined with
maintaining social welfare using either a single rating such as the Genuine
Progress Indicator or a dashboard composite rating of social welfare
that includes nutrition, health, mental well-being, and
restoration/preservation of natural systems. A measurement using a
GDP-like indicator would look to maximize growth of sectors like
renewable energy and energy efficiency while minimizing those sectors
that block the move towards sustainability (fossil fuel industries and
predatory lending)
b. Measurement and Targeting of Socioeconomic Well-Being In Future
Steady State Economy indicators of social progress or welfare would
look to remain within a range of acceptable values rather than maximize
or minimize performance.

8. Effective Climate Policy: A Massive Commitment of Public and Private
Resources

The long list above of features of an effective climate policy may fail the requirement
that some would place on documents such as these that they be short and easily
absorbed from a momentary scan of the page. Perhaps at a future date, I or someone
else will produce a shorter summary of what would go into effectively transforming the
energy basis of society and maintaining and developing civilization beyond its current
state. However when the scale of the challenge is taken into account as well as the
Page 26
stakes involved, I believe the length of the mere sketch I have produced here is
warranted.

Ultimately the argument that I would like to put to rest with this document is that
climate policy should be farmed out to a largely amoral market, within which the
motive force of socioeconomic change is simply the desire of market actors to
maximize profits and minimize losses. The construction of climate policy, contrary to
the market-based view, requires engagement of the full range of human capabilities,
including our ethical sense and our sense of belonging to a greater community.
Furthermore, an understanding of the role of government in monetary economies, still
poorly understood and torn apart by enormous ideological shearing forces, is central to
the success of any climate policy, a critical lapse in both the headlong rush in the 1990s
and thereafter into emissions trading or the slightly different carbon-tax/fee-only view of
climate policy. The yawning gap in the understanding of government in conventional
neoclassical economics, the basis upon which climate change economics has been built
to date, makes the transformation of the energy basis of society almost impossible, as, in
reality, governments will need to take a leading role in shutting down the fossil fuel
industries while organizing the building of a net-zero carbon alternative within a span of
a one to three decades.

A large portion of the substance of an effective climate policy are the spending and
budgeting decisions of governments with regard to numerous areas related to climate
and energy as well as direct regulations in the same areas, budgeting decisions and
regulations about which the various carbon pricing frameworks have almost nothing to
say. The substantial expansion of the public sector, of social supports organized or
funded by government and partial leveling of vast disparities in income and wealth
required by effective climate action seem to reinforce the contention of the Right that
climate action is simply a coup attempt by the traditional Left to assert its vision of
society in a new and unexpected guise. It might be contended that climate policy to
date has taken the tortured and ineffective shape that it has to reassure/contradict this
fear of the Right regarding climate action. Actually effective climate policy includes a
large-scale reconfiguration of the fiscal policy of government and the macroeconomic
accounting process that prioritizes and quantifies the mobilization of real resources by
government spending.

However this largely unspoken political argument about the politically-acceptable shape
of climate policy is at the moment conducted entirely within the erroneous premises
and assumptions of neoliberalism: a good government is a small government that funds
a small public sector and what results from this smaller government, it is assumed, is a
prosperous economy. Within this ideology, that small government can only affect
climate by manipulating via the quasi-monetary policy of carbon pricing the behavior of
businesses and households. Even if we did not seek to operate within the appropriate
carbon budget and transform the energy basis of our civilization, the neoliberal and
right-wing conceptions of what would constitute a good government have under almost
all circumstances not led to prosperity and freedom for the majority of a nations
citizenry. This conception of society and the economy has failed according to its own
Page 27
standards, let alone those of the monumental task of transforming societies to face the
climate challenge.

As it turns out, we have learned from bitter experience, the neoliberal political and
economic ideas of the political Right, now adopted by many centrists and in part
shrouded in academic respectability by neoclassical economics, function primarily as an
elaborate political and economic fraud promoted by knowing and unknowing agents.
The neoliberal ideology that is still dominant in many capitals of the world, has been a
largely successful attempt to convince the plurality of the electorate to participate in
their own immiseration and promotion of their own unfreedom for the apparent (short-
and medium-term) benefit of the financial elite, the very wealthy and their political and
ideological representatives. Austerity, the current intensification of neoliberalism after
the 2007-2008 crisis, is an effort to consolidate the political-economic position of these
privileged groups after their embarrassing, monumental failure to lead society and the
economy. Austerity attempts to achieve the goal of distracting and further extracting
economic rent from the public with talk of belt-tightening, undeserving workers,
overcompensated pensioners, and overleveraged homeowners. Meanwhile, in actuality
both neoliberalism and its new austerian version, sequester the power and benefits of
the apparatus of government and government finance for the benefit of the well-to-do
and the incumbent political-economic elite at the expense of the vast majority and of
the potential for effective climate action.

Saddest perhaps are those true believers in the market fundamentalist/neoliberal
ideology who actually are convinced that the removal of governments role is somehow
beneficial for the economy and for individual freedom. The ideals of a small
government, free trade, and a free market, which are never in reality achieved nor
should they be in many economic sectors, are held up by ideologues and some
economists as a means to strip away those aspects of government that are beneficial to
the broad majority of the public and beneficial to the medium- and long-term prospects
of private businesses that deliver real goods and services. A knee-jerk ideological
rebellion against the insights of John Maynard Keynes regarding macroeconomics,
neoliberalism is without substantive advice in managing the macroeconomy as well as in
helping nations develop real industrial assets to produce real goods and services, the
province of industrial policy, heretical to neoliberalism.

Unfortunately, these true believers in the fairy tales of free markets and minimal
government live in enough of an echo chamber and have been given enough support by
those millionaires and billionaires who cynically manipulate these true believers via this
ideology, to insist on their free market ideology as the description of a palpable reality.
So convinced are these foot-soldiers of the plutocrats by the repetitions of free market
mantras that they are willing to believe that climate scientists have created along with an
imagined or actual political Left an elaborate hoax to convince the world to revert to
something like Communism. So blinded are they by ideology that they believe
everything can be reduced to a political struggle that is part-imaginary and part-historical
(the capitalism vs. Communism conflict of the 20
th
Century), that natural and physical
systems cannot have a dynamic that inconveniently makes their ideology doubly
Page 28
irrelevant to the physical and social world as they actually exist. The dynamics of the
ecosphere in the Anthropocene create challenges for all political-economic schools of
thought but none more than laissez faire, free market beliefs so coddled by most
academic economists and by the vanity of wealthy patrons.

Effective climate policy cannot be formulated showing respect or consideration for the
anti-science of free market or laissez faire economics within which Homo oeconomicus
is assumed to rule. The sensitivities of our emerging oligarchy and their propagandists,
who have created an echo chamber in which the most sensible solutions are taboo or
ridiculed, cannot be factored into the discussions of actually-effective climate action and
policy. There are decisions to be made and many choices, almost none of which are
informed by the fantasy of unencumbered markets.

There are real political and economic dangers associated with the massive increase in
the size of the public sector and the role of government in leading the transformation of
the energy basis of our societies. That the chance exists for government to become
over-powerful or corrupt is not reason to trash the ecosphere for future generations or
to tailor climate policy that almost completely misses the boat in terms of
effectiveness. The opponents of climate action or the nave advocates of ineffective
climate action would hold us back from actually-effective climate action because of the
fixed idea that they subscribe to that government action is and will always be inefficient
and tyrannical, so should be shunned and not discussed with as much scientific rigor as
possible within the public sphere.

Ultimately vigilance, ongoing demands for transparency, and strengthening democratic
institutions are critically important within the transition to a net zero carbon society.
But working within a model of the economy that does not realistically recognize and
analyze the role of government will not yield effective oversight of government functions
in either the current economy or one in which we are making our best effort to
preserve the viability of the world for generations to come. The denial of the usefulness
and centrality of the instrument of government has and will never enhance liberty for
the majority of people.

Homo Oecnomicus and The Climate

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