26 July 2010

Personal Insecurity and Climate Politics

Last week I suggested that Julia Gillard, Australia's Prime Minister, was asking for trouble by promising that carbon pricing would transform society:
When will politicians learn that climate policies are a political loser if they require that people "transform the way we live and the way we work"? The vast majority of people simply do not want their lives transformed. Promising that government will transform your life is one way to ensure a rough political road for any policy -- climate change, health care, economic, whatever.
Michael Levi of the Council on Foreign Relations presents a similar argument with respect to "green jobs":
Basically, cap-and-trade introduces uncertainty at an individual level (though it does the opposite for actual investors); in the current economic climate, that scares people into thinking that they will lose their jobs. . . Anything that the public is unfamiliar with adds to uncertainty – and that is precisely what people don’t want. Second, green jobs may poll well across a wide spectrum of voters, but that doesn’t mean that selling regulation or taxation with a jobs message will work.
To succeed, policies focused on decarbonizing the global economy must not be seen as adding to personal insecurities, better yet, they should add to personal security. This should be a major lesson taken from the failure of US climate legislation.


  1. "Green jobs" will only be a net plus to the economy and total employment if they result in substituting a lower cost commodity for a higher cost one. To do the opposite, substitute high cost wind/solar for coal will result in a net loss of jobs in total. There is no free lunch. To believe otherwise is just silly.

  2. Look at the UK economy over the last 30 years. The loss of industry has meant the loss of well paid blue collar jobs. Most families only survive because the have two full time wages.

    American tourists I spoke to at an industrial museum recently, couldn't believe this famous town had no major industry left. None. On the other hand, a social welfare job is a lot easier than mining and less soul destroying than a factory.

    On balance, it's probably better, and a lot cleaner, to be honest. Although, given the choice, most folks would go for the money.

  3. Regulations necessarily create distortions in the marketplace. Cap and trade will likely cause an artificial scarcity in fossil fuels without sufficient substitution capacity in alternatives. This will drive energy prices up, leading to increased cost of goods in energy intensive industries like manufacturing, transportation, and construction along with the accompanying decrease in profits. The affected industries will respond to declines in profits by laying off workers. Oil companies and financial services companies will, on the other hand, benefit from this regulation through increased profits. But, these profits will lilely be distributed rather than reinvested since investment capital is not what drove the profits (regulation did). Net-net -- we'll see an overall loss of jobs and a shift of income from lower wage workers to top wage workers in Energy and FSI (who just so happen to be the leading campaign contributors to those politicians advocating cap and trade).

  4. The loss of UK industry was caused by uncompetitive high interest rates, which also boosted the banking industry.

    Uncompetititve energy prices will do the same for carbon trading countries. To what extent, isn't obviously known.

    The stated aim is to increase energy prices.

    Europe's climate commissioner Connie Hedegaard is to set out the case for a unilateral 30% EU cut in CO2.

    At the end of May she will unveil research examining the consequences to Europe's economy of outdoing the current 20% target.

    The commissioner admitted that she was worrying that public scepticism about climate change is on the rise in some countries - particularly, she said, the UK. "The day we have 100pc certainty it's too late to act," she said.

    Commenting on the suggestion from the Hartwell Group that the Kyoto Protocol would not deliver and the carbon markets would not work, she told BBC News: "Given the huge disappointments of this year it is understandable that some people would say we should find a different approach.

    "But I would remind people that we now have all the world's major nations agreeing that they bear a share of the responsibility for protecting the climate and keeping temperature rise below 2C - that would have been inconceivable if you had suggested it a few years ago.

    "It is too soon to kill off Kyoto. And the carbon markets can provide us with more finance for clean development if we can drive up the carbon price somehow. "It's not an accident that China is now developing trial carbon markets with major firms."


  5. To succeed, policies focused on decarbonizing the global economy must not be seen as adding to personal insecurities, better yet, they should add to personal security.

    Not only "personal insecurities" but a lower standard of living. The problem with decarbonization is that it means switching from low cost energy to high cost energy and too many people have taken Econ 101 and know the result of that switch.

  6. "The problem with decarbonization is that it means switching from low cost energy to high cost energy"

    It really depends on implementation strategies.

    As a case in point, Dow is coming out with Solar Roofing Shingles.

    They'll add $10,000 to the cost of a roof with a payback period without subsidies of about 10 years for those living in areas with good sun.

    DOE has been splashing some R&D money around on various manufacturing technologies in an effort to bring manufacturing costs to the point of commercial viability.

    There is more then one way to achieve 'decarbonization', tax carbon, subsidize the alternatives or spend on R&D to bring the costs of the alternatives down.

  7. "Green jobs" is just a special case of the broken window fallacy.