Breaking the Deadlock

Bank of England loves the idea of Global Climate Compensation

Source: Patrick Chappatte

The weekly newsletters from The Economist always end with some words of wisdom. A recent one contained the following quote:

Problems that remain persistently insoluble should always be suspected as questions asked in the wrong way. -- Alan Wilson Watts

I completely agree. Mainstream thinking about the climate crisis was always limited to replacing fossil fuels with new and even cheaper sources of energy. The thinking probably goes back to the famous quip by Sheik Yamani that “the Stone Age did not end due to lack of stone.” Unfortunately, his statement is misleading, as the Stone Age never ended. Our society uses more stone than during the Stone Age, more copper and tin than during the Bronze Age, more iron than during the Iron Age, and an enormous amount of fossil fuel on top of that.

The reality is that we cannot replace fossil fuels, but we need to stop using them anyway. However, as oil is the elixir of power in our world, nobody wants to do so. To give a historical analogy, it is like the asking the Roman legions to switch back to stone axes to limit their environmental impact. And remember, the Earth’s biosphere has yet to recover from the Romans. The armies of today are powered by oil, and this is not going to change in a foreseeable future. A world that spends two trillion dollars annually on the military does not take climate change seriously. The picture below of kerosene-powered military aircraft flying over burning oil fields says it all. If the US military were a country, it would be the 47th largest emitter of greenhouse gases in the world.

Source: Shutterstock.

Thus, humanity is happily marching down the path of destruction. I recently, came across this remarkably astute observation by Vera Brittain on the assemblies of the League of Nations:

The Assemblies of those early years were worth attending, for the Foreign Ministers of the Great Powers had not yet realised how easily, by means of a little tact and some elegant camouflage, the League might be used as a stage on which they could play the skilled game of the Old Diplomacy circumspectly dressed up in international costume. Before 1925, perhaps as many as fifty per cent of the delegates who went to Geneva honestly believed that the organisation of international peace was a workable proposition.
—Vera Brittain, Testament to Youth.

As the saying goes, it is déjà vu all over again. The League of Nations was founded in 1920 to prevent future wars, and it fair to say that it was not very successful. The Conference of the Parties (COP) was founded in 1992 to stop global warming and it is also failing. International collaboration is difficult.

One fundamental problem is that the people in charge often have less power than they are prepared to admit. Most political leaders who travelled to COP26 were perfectly aware that they did not have the political mandate to implement radical climate policies at home. Thus, greenwashing becomes the rational choice. A majority of the voters want low energy costs, and a minority are worried about climate change. By pretending to be doing something, politicians can satisfy everyone. The same argument can be applied to business leaders if you replace “voters” by “customers”.

A second problem has to do with the Tragedy of the Commons. The statement that the costs of climate change will be higher than the cost of climate protection is true, but only if all countries participate. It does not apply to a small country like Switzerland, which can do very little about global carbon emissions. Whether the Swiss glaciers will survive or not will not be decided in Berne, but in Beijing, New Delhi, and Washington. Of course, as a rich country with a large per capita footprint, Switzerland is morally obliged to lead the way. But morals are less important than food, as Bertolt Brecht famously observed: Zuerst kommt das Fressen, dann die Moral.

The idea behind Global Carbon Compensation is to force the hands of politicians and business leaders by changing the rules of global competition. It will still be possible to innovate and compete, but not by simply pumping more oil and gas. Fossil fuel can still be used but only if you are prepared to share the profits with the rest of the world. This would lead to a more efficient economy, which rewards true innovation rather than environmental destruction.

Don’t take my word for it. A couple of days ago, Bloomberg reported that the Bank of England is in favor of the idea. Since the article is behind a paywall, I will quote the most important points:

A Bank of England policy maker said adopting a global price on fossil fuel pollution could spur investment and productivity that would lift the world economy out of its torpor.

Catherine Mann, a member of the U.K. central bank’s Monetary Policy Committee, said that pricing carbon emissions everywhere could feed a fundamental improvement in productivity that would give a positive jolt to growth.

“Changing the rate of the relative price of carbon is a game changer for creating incentives,” Mann said at a web event hosted by the European Investment Bank on Thursday.

I am not sure about the growth part, but I am sure that GCC would be good for humanity. The only way to find out how fast we can decarbonize the world economy is to try. Fortunately, the experiment would be risk-free, reversible, and easy to implement.

I will write more about my ideas for the implementation in the next couple of weeks, but I am always very open to suggestions. Making GCC happen will be a team effort and will require dedication and hard work, so please get in touch.

A first step consists of spreading the word: the climate crisis is manageable and has a rational solution.

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I was somewhat overwhelmed by the response to my first post on this topic, which was very constructive and encouraging. Thanks a lot!

Best regards,
Henrik