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No, really, why are we waiting?

Why Are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change

by Nicholas Stern. Cambridge, MA: The MIT Press, 2015, 448 pp.

British economist Nicholas Sterns Why Are We Waiting? revolves around an ethical argument he made a decade ago on the economics of climate change in his famous "Stern Review." Stern pushes total intergenerational equity: we should not discount future generations' welfare simply because they do not yet exist. It's a bold position that's unpopular among his economist peers, and it pushes Stern to endorse dozens of policy options to address climate change throughout this new book.

Stern's policy pluralism is appealing in many ways. But the rest of his book stands on a jumbled account of political economy and history--in particular, the history of energy transitions which are so crucial to his argument about climate action. With this shaky foundation, it's disappointing but not surprising that Stern doesn't convincingly answer his own question: Why are we waiting on climate action?

Failed markets

In contrast to many climate authorities, Stern does not idolize one policy approach to climate change at the expense of others. Stern also seeks multiple motivations that policy makers might use to justify climate action. This is a hallmark of democratic decision making in which the different parties have distinct rationales for pursuing a course of action. In addition to a lengthy meditation on ethics, he also includes arguments about conventional pollution, "green growth," and the co-benefits of zero-carbon technologies.

Unfortunately, his helpful suite of climate solutions emerges from an unhelpful assessment of the root of the climate problem.

Stern agrees with the environmental economic convention that climate change is fundamentally a problem of "market failure." But where most economists would contend that climate policy is intended to fix one market failure--greenhouse gases--Stern identifies six: greenhouse gases; underinvestment in research, development, and deployment (RD&D) of energy technologies; imperfections in capital and risk markets; lack of coordination among networks; imperfect information; and under-recognized co-benefits. One wonders how a problem that results from six market failures can or should be fixed by marshaling "market-based" policy instruments.

To elaborate, the allure of a market-based policy is in its purported ability to fix something that's broken within the market. This makes sense in a relatively static system. For instance, increase the cost of something socially undesirable (like smoking) with a tax, and demand for it will decrease. But neither energy infrastructure nor political economies are static; they are, rather, what theorists call "complex adaptive systems." In these constantly evolving systems, policy and technology, rather than price signals alone, chart the course. Markets work within these systems to deliver information efficiently (prices are essentially information about the relative supply and demand of a good), but if the goal is to change the system, markets are not really up to the task. For instance, a market-based policy like a price on carbon might encourage consumers to buy more fuel-efficient cars, but it will fall well short of revolutionizing global energy infrastructure and technologies.

What makes Stern unique is the way he combines neoclassical economics--the conventional allegiance to rational markets, price signals, and static equilibrium--with evolutionary economics--which looks to institutions and directed technological innovation to help explain things like economic growth or structural change. He invokes foundational evolutionary theory, including Nikolai Kondratieff's "waves of innovation" and Joseph Schumpeter's "creative destruction," arguing as they did that energy transitions are fundamentally shifts to new "techno-economic paradigms."

By setting the table with Kondratieff and Schumpeter, Stern seems to understand the essential role of proactive states and technological innovation in driving energy transitions. But he immediately follows with an insistence that unlike past transitions, "policy to correct market failure is now central." Why would we seek to use different tools for this transition than those that have worked in the past? How can a market-based solution be central to a transition that is not fundamentally market-based, but technology- and policy-based?

History reveals that prices and scarcity have rarely, if ever, driven large-scale energy transitions. We transitioned away from whale oil after discovering much more abundant and useful petroleum-derived kerosene, not because we were running out of whales. Electricity and the internal combustion engine emerged after decades of technological toiling and created whole new uses for energy. War, perhaps the most state-directed of all enterprises, accelerated the diffusion of several key energy technologies, most notably the internal combustion engine, jet turbines, and nuclear reactors. Today, hydraulic fracturing in shale emerged from government-funded labs and has diffused because of its usefulness in cost-effectively accessing previously hard-to-reach natural gas deposits. This is the work that governments have done since Alexander Hamilton invented industrial policy, not as a corrective to proliferating market failures, but as foundational and continuous policy to create and shape markets themselves.

Were we to build a new climate-friendly, techno-economic paradigm, we would recognize that energy systems are not fixed, but dynamic. We would realize that we are living through a moment in a centuries-long process of energy transitions, not one market fix away from perfecting the energy system. We would emphasize tools that have worked in the past: tools like industrial policy, public-private RD&D to make clean energy cheaper, and adaptive regulatory platforms to accommodate new technologies in society. No matter how dramatic the assessment of climate risk, the solution lies in governments long-established responsibility to accelerate technological innovation and deliver clean, cheap, abundant energy.

Stern endorses many of these policies and deserves credit for venturing outside the neoclassical dogma. But each of Stern's endorsements responds to one of his numerous market failures, belying an allegiance to a neoclassical framework that has little relevance to the history or future of technology and energy transitions. Stern devotes very little time in his book to actually studying these transitions. (For a better treatment of this history, see the work of Roger Fouquet, Vaclav Smil, or Arnulf Grubler.)

Deniers aren't the problem, and more science isn't the solution

Stern is confident that the shift to clean energy will be successful because he sees precedents in the past. But they're the wrong precedents! I would have thought that in comparing the modern energy transition to history, Stern would examine earlier energy transitions. Instead, he highlights smoking, leaded gasoline, drunk driving, and HIV. This echoes the common comparisons "climate hawks" make between clean energy and marriage equality in the United States, the latter of which was actually successful precisely because it did not require a rapid, global transformation of all global infrastructure, investment patterns, and consumption.

With the wrong historical comparisons in mind, when Stern attempts to answer the question of "why we are waiting" to confront climate change, he disappoints.

In the first pages of the book, Stern insists that "communication of the science is crucial" to convince the public and politicians of the need for action. And in his final chapter, the first answer to his question "why are we waiting" is "the communication deficit." This could not be further from the truth. In Sterns own formulation, the science already tells us that global catastrophe is just around the corner, on a spectrum from massive economic losses to the possibility of human extinction, and drastic, decades-long action must commence immediately. What could more science do to deepen that conclusion or make it seem more dire?

To the contrary, mounting evidence over the past two decades confirms that "more science" actually sharpens polarization. There is an abundance of scholarship that would immediately complicate Sterns position on the usefulness of more science to policy making (see, e.g., Daniel Sarewitz's "How science makes environmental controversies worse" and Matthew Nisbet's "Communicating climate change: Why frames matter for public engagement"). It is especially odd that Stern does not heed Dan Kahan's criticisms of the "deficit model," where Kahan argues that the public takes positions on issues through cultural and value lenses, not scientific information. Since Stern cites Kahan's work later in the chapter, it is a wonder he does not realize this.

Stern blames the "deniers/delayers" for society's climate inaction, writing that "climate deniers, vested interests, and ideologues have attacked both the scientific evidence on climate change and politicians' attempts to regulate emissions and build strong carbon prices." Although this is an extremely common excuse for inaction among climate policy advocates, there is little evidence for it, and it is a shame an expert like Stern would fall for it. Climate policy has failed in Europe because of weak economies and public unwillingness to accept higher energy prices. In the United States, the 2010 climate bill was defeated by manufacturing interests and coal-state Democrats. Many congressional Republicans, of course, also opposed the bill for small-government reasons, not primarily because they denied the science of climate change (Senators Lindsay Graham and John McCain being key examples). If there is any influential climate denial lobby driving growth in emissions in emerging economies such as China and India, I have yet to see anyone identify it. Stern does not.

Large majorities in every major nation on the planet accept the scientific consensus that humans are causing climate change. Acceptance (or denial) of the science is not the problem. Readers who had hoped for a real treatment of this subject would be better served by Mike Hulme's phenomenal Why We Disagree About Climate Change (2009) or John Vogler's Climate Change in World Politics (2015).

Innovation is key

The real problem is that despite the marketing on display in Sterns book and elsewhere, clean energy simply hasn't yet matched fossil fuels on cost, availability, or scalability in all contexts. Progress has been impressive, but we can't take our eyes off of the goal of sustained technological innovation.

Because Stern heaps praise on so many different solutions, he speaks approvingly of a few of my favorites. He should be lauded for championing green industrial policy and ambitious clean energy RD&D. Even better, he demands that we use international institutions to accelerate energy innovation, arguing (as my colleagues and I did in our 2014 report, High-Energy Innovation) that we should emulate the successful agricultural innovations achieved by the organizations at the heart of the Green Revolution. He also advocates advanced nuclear power, agreeing with the International Energy Agency that nuclear power could become "the largest single source of electricity" in the world by 2050.

As such, I don't want to be overly critical of Stem. Compiling a broad set of approaches to address the changing climate should have been the first step pursued by international negotiators 25 years ago. Instead, they demanded an unworkable framework of legally binding international emissions targets, influenced and supported by climate hawks who demanded a laser focus on increasing renewable deployment and energy efficiency, mainly through market mechanisms such as cap-and-trade and carbon taxes.

But Stern's lack of historical perspective is unfortunate. For such an exhaustive text, Why Are We Waiting? confuses more than it clarifies.

Alex Trembath (alex@thebreakthrough. org) is a senior writer at The Breakthrough Institute.
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Title Annotation:Why Are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change
Author:Trembath, Alex
Publication:Issues in Science and Technology
Article Type:Book review
Date:Jan 1, 2016
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