Green hypocrisy: Still kicking the ladder

Under the guise of benevolent greenie-speak, governments of developed countries are once again pushing for old-school protectionist industrial policies as they see their technological advance crumbling vis-a-vis the emerging countries.

While developed countries engage in esotheric greenie-speak despite being the largest per capita polluters, emerging countries have embarked on an impressive industrial upgrading towards innovative, R&D intensive energy sectors: Within ten years, India-based Suzlon Energy has become the largest wind turbine manufacturer in Asia (5th in worldwide). In 2009, China has overtaken Denmark, Germany, Spain and the US in the production of wind turbines, increasing her installed wind power capacity almost 25 fold in only 4 years. China has also leapfrogged the West in two years to become the largest manufacturer of solar panels.

In response, EU and US have adopted a hypocritical and highly inconsistent stance, calling for protection in face of increased (free market) competition. Months ago, Sarko called for "carbon tariffs" to prevent carbon leakage, thereby forcing emerging countries to adopt more sustainable manufacturing (de facto stifling its manufacturing by imposing tight regulation). Not only has this populist (and by the way WTO non-compliant) call been supported by Stiglitz beginning this year. Only two days ago, the French have renewed their calls for a "carbon tariff", underlining its importance in fighting global climate change. Similarly, "Lord" Turner (head of UK climate change committee) has likewise called for a levy against cheap (Asian) imports to stimulate the transition to a green economy. Just today, Germany's green party even openly called for protectionism against Chinese solar imports.

Most proponents of first-world protectionism, however, have been much more subtle, and it is amusing to see how yes-we-can greenie-speak is employed to disguise policies that are, at the end of the day, deeply nationalistic and run against the neoclassical free trade ideology. Of course, this kicking away the ladder-mentality is nothing new to the developed world. Nevertheless, it will be very interesting to see how the developed world will bend its own WTO rules to implement yet another round of ladder kicking (see image).

Soil not Oil

Some people inspire with their wisdom, some with their accomplishments and commitment. The Indian environmental and human rights activist Vandana Shiva, who came to Berlin on the 3rd of November 2009, is a woman of erudition and integrity. She presented her new book "Soil not Oil" to the German readership in a confident and persuasive manner.

The book speaks of a triple crisis: one that affects climate, energy and food. She highlights the food crisis as the most dire and urgent problem, since it poses an immediate treat to the survival of the poor. The industrial system based on fossil fuels affects the poor in three ways:

i) they suffer work displacement in consequence of changed food production structures,

ii) they experience disproportionately the consequences of climate change,

iii) they are victims of pseudo-solutions like biofuels, which divert their land and food.

Vandana Shiva uses a simple language that wants to inspire and provoke action. The encounter with her raises two questions of economic concern: the social costs of climate change and the unsustainable industrial food system.

1) Is cost-benefit analysis possible?

Environmental economists are inevitably faced with the familiar cost/benefit and quantity diagram. It determines the efficient quantity of production at the intersection of the marginal social benefit and marginal social cost. The idea is then to implement different measures in order to reach this efficient point (price and quantity tools). All this as if the marginal social costs could be objectively measured. The economists then embark on a cost-benefit analysis that, measuring willingness to pay and willingness to accept (e.g. Perman et. al, 2003) approximating the value of environmental quality. Yet willingness to pay clearly doesn't equal ability to pay and this is how low-income countries are at a disadvantage.

Climate change affects disproportionately poor people. A number of examples from Shiva's book include cyclones in Bangladesh and Burma, unprecedented snowfalls in China, extreme rain and floods in India as well as droughts in many other regions. The people's livelihoods in less-developed countries depend heavily on agriculture and a rapid change in climate conditions leaves them threatened and unprepared for the consequences.

Nordhaus and Stern have been encouraged to express the damage of climate change in terms of percentage loss from GDP. The most dramatic loss predictions are for the countries around the Equator: predominantly low-income countries (Nordhaus, 1999). If the high income countries are not going to suffer as much as poorer countries, then how will they internalize the negative effects on those with lower income?

2) Economies of scale - optimal degree?

Shiva criticizes the "pseudo-solutions" of the Western countries including emission trading and biofuels. She claims that 40% of the climate problem is rooted in the unsustainable way of industrial and factory farming: processing, transport, packaging, food waste. In the globalized food system 1 kilogram of food causes 10 kilograms of CO2 emissions. At the same time the same system of ecological farming that would allow more food production will also allow reductions in CO2 emissions.

Clearly ecological farming contradicts the simple economies of scale idea, which persists that expansion of production has cost advantages. What could be though the aspects that economies of scale ignore? Industrial farming not only leads to lower quality food, but causes carbon emissions the costs of which are not on the industry's balance sheet. Moreover the economies of scale are distribution-blind and those cost advantages and higher profits, as economically efficient as they might be, will never be seen by small scale farmers. No wonder transnational companies got so rich in the last decades.

As confident and wise as Vandana Shiva may be, would her ideas be more than wishful thinking? The change that she stands for requires a global structural change, which would hardly result from less than a massive-scale revolution. Her speech in Berlin could be also seen as "preaching to the converted", since the great majority of listeners belonged to an environmentally conscious social group, which applauded all of her statements with little criticism. The people in the industrialized countries are still too comfortable with their lifestyles to be environmental revolutionaries and the gap in standard of living might be a serious obstacle in people's perception of how urgent action on climate change is.