Consider the destruction of a rainforest to make room for a palm oil plantation. Or some island jurisdiction changing its tax laws. Or catching a plane from London to New York. All have effects, some of which can be captured by a market, some of which cannot. If globalisation means anything, it means that these effects can have ramifications far beyond the territory in which they take place.
Many of our actions have impacts on the physical environment, and most of these aren't captured by the market. Economists call these externalities. The negative impacts of fossil fuel use include air pollution. Even limiting ourselves to the impacts of air pollution, we don't know all the long-term effects. We suspect that they are or will be deleterious to human, animal and plant life. (In net terms, that is: some populations will benefit.)
The problem policymakers face is that the positive externalities of, say, fossil fuel use are upfront and of similarly huge dimensions to the negative. Every plane flight hugely benefits the passengers on board, their pals, the crew, and the others employed by the airline industry ... and then there's the freight. A fraction of these positive impacts, but not all, is captured by the market. At least as compelling are the positive externalities resulting from fossil fuel use in general: the benefits of electricity, heat, air conditioning.
To summarise: the market captures and quantifies some but not all of the impacts of a transaction. It misses a lot of positive and negative impacts. It fails to capture any impacts of anything we do that is not a transaction. All this is to say that fossil fuel use has huge positive impacts as well as negative, and we cannot say whether the negative effects outweigh the positive. The market does not, and cannot help us, because there's no way we can know and weight all the objective impacts accurately, but also because many impacts are subjective and unquantifiable.
Climate change: do we care?
Take climate change. The net negative impacts on human, animal and plant life of climate change – probably better termed climate breakdown – are incalculable and massive. Possibly catastrophic. We are pretty sure, but not certain, that greenhouse gas emissions cause some, maybe much, maybe all, of climate change.
We can, though, be more certain about whether we really care about the threat of climate change. And the answer is a resounding: not really. Lots of conferences, exhortations, subsidies for renewables (though not as many as for fossil fuels - see below), stirring rhetoric and doom-laden prognostications. Some change? Sure, at the margins. But meaningful results? No, no, no.
It's true that our political systems are so corrupted by their proximity to the ultra-rich that the long-term interests of millions of ordinary people count for less than the short-term goals of billionaires. The ultra-rich and their lackeys in and out of government are responsible for some of this: fossil fuel subsidies are estimated to be worth $160-200 billion per annum, and we are pretty indulgent in letting billionaires dictate policy. But that cannot be the complete answer. It's more like a cop-out.
The fact is that we have collectively chosen not to do anything significant about climate change. We’ve chosen quality and quantity of life in the short run, over quantity and quality of life in the longer term. We find it easy to do this, in my view, because:
- 'Climate change' is too abstract. and
- We focus too intensely on greenhouse gas emissions, whose effects aren't fully known, and whose reduction might or might not do anything significant to bring about a more benign climate at some indefinite future time.
Limiting greenhouse gas emissions isn't happening and isn't going to happen. Even if the billionaires were to switch sides, most of us don't really want it to happen. The costs are upfront, the benefits nebulous and long term. What we want, what we can understand, relate to, and identify with, are reductions in the more tangible environmental pathologies: flood, wildfire and other adverse climatic events, loss of biodiversity, loss of wilderness, pollution of the air and seas. It's not solely an issue of presentation. We are more ready to pay taxes to help human, animals and plant life than we are to do something that might reduce the increase of some measure of global temperature some decades hence.
So I suggest that we divert resources from trying to reduce greenhouse gas emissions to solving other environmental problems, including those caused by climate change.
One way we could do this is by massively backing global Environmental Policy Bonds. These could target our biggest environmental challenges, regardless of their supposed source. The bonds would reward the achievement of verifiable, meaningful environmental outcomes. Examples: cleaner air, cleaner seas, reduced losses of biodiversity and habitat. We could target for reduction those environmental ravages that we now attribute to climate change including species loss and the impacts of adverse climatic events. The way the bonds would work means that investors would work out for themselves at all times, whether or not the best way of dealing with our environmental challenges is to tackle what we think are their root causes.
We need diverse, adaptive approaches. No single, top-down, one-size-fits-all policy will work. Environmental Policy Bonds can encourage the array of diverse, adaptive approaches that we need to begin to solve our environmental problems.