Sustainability Bites

There is no such thing as a free lunch

The sceptical economist

by | Oct 24, 2023 | 1 comment

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By Quentin Grafton

Quentin Grafton is a well-known Professor of Economics at the Australian National University. He applies his economic toolbox to a wide variety of social and environmental challenges, with a particular focus on the connections between human actions and the environment. Three decades ago, as a newbie academic economist, he held many concerns about the trajectory of the planet but was confident that with the intelligent application of the many tools available to humanity (especially those relating to his own discipline) that the world could steer itself towards sustainability. Thirty years on, he’s not so sure. Here he explains why we should all be sceptical that business as usual will ‘save the day’.

Hopes were high in the northern summer of ‘92

In July 1992 I was a ‘freshly minted’ PhD in Economics from the University of British Columbia and I had just started my first academic job as an Assistant Professor at the University of Ottawa, Canada. It was high summer, hot and humid, and I was having lunch with two colleagues, one of whom had returned from attending the 1992 ‘Earth Summit’ in Rio de Janeiro, Brazil the previous month.

A key agreement at Rio was the United Nations Framework on Climate Change (UNFCC) that was signed by 154 governments on 12 June 1992 and that came into force in March 1994 after ratification by a sufficient number of countries. The UNFCC is the basis for inter-governmental co-operation on climate change, including the annual Conference of the Parties (CoP) and thirty-one years later, the 28th CoP will be held in the United Arab Emirates at the end of this year.

One of the key principles of the UNFCCC was the adoption of the ‘precautionary principle’:

The Parties should take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects. Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures, …

Governments signing up to the UNFCC committed to:

…adopt national policies and take corresponding measures on the mitigation of climate change, by limiting its anthropogenic emissions of greenhouse gases and protecting and enhancing its greenhouse gas sinks and reservoirs. These policies and measures will demonstrate that developed countries are taking the lead in modifying longer-term trends in anthropogenic emissions consistent with the objective of the Convention,…

I was excited to hear a first-hand account of what happened at Rio and what my friend thought would come of the multiple agreements. In addition to the UNFCCC, governments signed the Convention on Biological Diversity and to 27 Principles known as the Rio Declaration. Principle 7 of the Rio Declaration includes:

States shall cooperate in a spirit of global partnership to conserve, protect and restore the health and integrity of the Earth’s ecosystem.

Our view, at the time, was that Rio Earth Summit was a turning point when governments, collectively, became ‘serious’ about responding to global environmental problems, including climate change and biodiversity loss. Even the world’s largest emitter at the time, the United States of America, signed the UNFCC on 12 June (and ratified it on 15 October 1992) and its President, George H. Bush, attended part of the Earth Summit. This inclusion of the USA as a signatory to the UNFCC was a surprise to me, and many others, because President Bush had made his fortune on Texas oil. Nevertheless, he famously stated just before the Rio Summit that “The American way of life is not up for negotiations. Period.” (It should also be noted that the USA refused to sign the Convention on Biological Diversity.)

Half a lifetime later

That Canadian summer it seemed, at least to me, that many of the world’s governments were taking the unfolding environmental crises seriously and were prepared to act. All three of us agreed that governments would soon need to move from principles and statements of intent to targets and meaningful actions. Yet all three of us believed that there was enough time to act. Indeed, I remember saying that even if it took 10 years, (which was third of my lifetime in 1992), we were on track to resolve the growing climate crisis.

We were so wrong.

Fast forward three decades and my age has doubled. And, we have also run out of time to stop the disruption that climate change would bring. It’s here, it’s now and its impacts are huge.

To give a sense of what we failed to do after 1992, at a Press Conference on 27 July 2023, the UN Secretary General António Guterres stated:

The era of global warming has ended; the era of global boiling has arrived.

The Secretary General’s frustrations are a culmination of many years of lost opportunities. His speech coincided with a month when global temperature observations were the highest ever recorded across the globe and with the lowest amount of sea ice ever observed in winter time around Antarctica.

Despite the many good intentions and principles agreed to at the Rio Earth Summit back in 1992, the world is currently on track for catastrophic climate change, unless we change ‘business as usual’. Indeed, in the northern hemisphere summer of 2023 I visited Canada. On this trip I experienced first-hand the fires and smoke of an unprecedented ‘summer of fire’ and cut short a visit to Kelowna, British Columbia, because of smoke and fire danger.

Tweaking BAU

Since Rio, I have changed my mind about the world’s future. If you had joined me for that lunch in July 1992, I would have told you that business as usual, with some ‘tweaks’, such as a carbon price, would fix the ‘externalities’. These externalities are what economists refer to as external costs that we, through our production and consumption, impose costs on others (like second-hand smoke) and the environment (like greenhouse gas emissions).

I would have said that, in time, and with the good will demonstrated at Rio, that many of us would get richer, including the poor, and that the lives and those of our children, and subsequent generations, would be better than our own.

According to what I believed in 1992, those who might otherwise get left behind would be helped with transfer payments and welfare, and aid and trade globally would help make the world a better place for the both the poor and the rich, but not necessarily in the same measure. In other words, business as usual, with some ‘refinements’ to account for environmental costs and greater attention for the impoverished, would act as a rising tide that would eventually lift all (or most) boats.

I no longer consider this to be true.

What do you think is happening?

Even young adults, and certainly those middle-aged and older, have witnessed profound changes in the natural world. The science tells us that these changes will accelerate.

You may be like many of my economist colleagues who still believe that business as usual (which we will refer to as BAU) with some ‘bells and whistles’ is all that it will take to ensure continuing prosperity, forever.

In a defence of BAU, some might expect the great strides in technology over the past 100 years to continue, and possibly accelerate, with developments like artificial intelligence (AI) and Big Data. Some might believe that these technologies, and others, will provide the solutions to present and future challenges. BAU apologists would correctly highlight that more than one billion fewer people now live in extreme poverty (less than US$ 1.90/day/person) than did in 1992; proof to them that the world is getting better, not worse.  

A glass half, three quarters or almost full view of the world would be fine if we could ignore or trivialise what is happening to our climate, to our biodiversity, to our water, or what economists call ‘natural capital’. While human-made capital and average per capita incomes have grown over the decades, natural capital has diminished in many places.

China, the ‘poster child of rapid economic development, shares two records; first, for its economic growth miracle and second, for its accompanying pollution (and associated environmental degradation). While much attention has been given to China’s remarkable economic ‘catch up’, less attention is directed to its other record performance. In 2006 China overtook the USA as the world’s largest emitter of greenhouse gases (GHGs). By 2019, China’ GHG emissions (CO2 equivalent) equalled the combined sum of GHG emissions in the USA, the 27 countries in the European Union, India and Russia.

No quick fix, no ‘net zero’ silver bullets

For BAU optimists, end-of-pipe treatments and a shift to less polluting industries show how, in time, the environmental quality will eventually improve just like air quality has got better in London and Tokyo, and some other cities in rich countries, over the past 60 years. According to this view, with a scaling up of clean technologies, and a tax here and a subsidy there, all will be well.

But, unfortunately for us all, Nature is not a bank account that can be drawn down and then invested in, and where debits and credits are the same and only differ by their sign.

What we are currently experiencing at a planetary scale is a rapidly changing global climate distorted by cumulative emissions from over 150 years. It is atmospheric concentrations, not current emissions, of carbon dioxide, methane and other greenhouse gases that is driving us towards a warmer and much less stable climate. This means that countries, many of the rich and industrialised (e.g., United Kingdom, Germany) have contributed much more to greenhouse gas concentrations from cumulative emissions than their current emissions indicate.

There is, sadly, no ‘quick fix’ despite the rhetoric around carbon sequestration and geoengineering or the claim that we can continue to emit GHG emissions for the foreseeable future so long as they peak in the 2030s, or there about, and then have ‘negative emissions’ and sequester carbon later. This is a sort a global ‘have your cake and eat it too’ scenario. It’s the false claim based on the view that negative emissions at sufficient scale will deliver ‘Net Zero by 2050’. This belief gives many leaders an ‘out’ to put off the really hard decisions to drastically reduce actual emissions for another decade or two.

What we are hearing and reading and seeing is a continuation of the grand rhetoric from Rio over thirty years ago in which ‘BAU with modifications’ will give us richer tomorrows with no sacrifices today. It’s based on the fantasy that carbon offsets and credits, the planting of one trillion or more trees, and advanced machines can suck enough carbon dioxide out of the atmosphere to set the world right.

This is a sort of a BAU with ‘market and technology extras’ that will allow us, with a few tweaks, such as driving an electric vehicle (EV), to carry on as we have always done. If only this were true. While the energy transition and other developments are undoubtedly helpful, they will not work at the scale and at the speed required to prevent our current trajectory towards catastrophic climate change.

Future present

My key point is that business as usual, even with all the brightest bells and squeakiest whistles, will continue our trajectory towards catastrophic consequences. A world where, in the next few decades, it’s very possible that there will not be enough food to feed all people, regardless of how the food is distributed, and where hundreds of millions of people will be displaced to become ‘climate refugees’ in their own or other countries.

This is future, coming soon, and certainly within the lifetimes of many today, where heat extremes will kill tens of millions of people and where our environments, be it tropical coral reefs, forests or the arctic, are changed irrevocably.

That is, the world that we knew, and that we in 1992 believed would continue, will end.

There is much that we can do to avoid a catastrophic future, including spotting the inconsistencies and contradictions inherent in BAU while holding our leaders to account. In future blogs, and in this space, I will respond to BAU and share what I think we can do and what we can’t do in response to what’s coming.

Quentin Grafton is Professor of Economics at the Crawford School of Public Policy, Australian National University. He is the Convenor of the Water Justice Hub, and Executive Editor of the Global Water Forum.

Banner image: “Back in 1992 at the time of the first Earth Summit we believed that there was enough time to act; that, with a little clever tweaking, business as usual could deliver us real and enduring sustainability; that we could resolve the growing climate crisis. We were so wrong.”
Image by Enrique from Pixabay

1 Comment

  1. Jonathan Miller

    Thanks, Quentin, for your thoughts.

    The dominant mental frame of the powerful in our society is neoclassical economics, giving economists huge sway in policy. With all due respect to your profession, neoclassical economics does not deal well with natural systems. The low point of this was the work of Nordhaus who determined that 4 degrees climate change (which would be catastrophic) was optimal – and was then awarded the Nobel prize. In contrast, the voices of earth systems and life sciences, critical to understanding our current predicament, are margin-dwellers.

    Limits to Growth said it all over fifty years ago and was probably the most important book of the last century. Its projections are still on track, but its message is still ignored. Rather than tinker around the edges, we need to understand the complex social factors causing our existential environmental crises, and address these drivers. We need radically different paradigms for our society and its relationship with the physical and natural environment. Alas, politicians think we can just make a renewable energy transition and continue economic growth indefinitely. It is not clear how anything other than collapse will change this.


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