Enter the Economists: Part I—Part II—Part III
Summary and Discussion at Bishop Hill
What price Climate Change? Before Stern and Garnaut there was Pearce. Chapter 6 of the IPCC Working Group III 2nd Assessment by David Pearce et al is now forgotten, yet it caused the first public controversy in the history of the IPCC. This chaotic assessment of scant and confused costings of expected damages was under attack before it was even drafted. The ensuing scandal over the price of life among the world’s poor dragged the IPCC into an embarrassing political controversy that broke at the very first Conference of Parties to the climate treaty. It was a taste of things to come, with authors simultaneously publishing what they assessed, leaking drafts, and pressure at the intergovernmental Plenary to change the chapter in conformity to a re-write of the Policymaker’s Summary. But there were important differences also. While later in Madrid Ben Santer was entirely complicit in the push to change his Working Group I Chapter 8, David Pearce and his crew held their ground against the onslaught in workshops, plenaries and finally through the press. Indeed, the authors won the battle for scientific independence, but at what price?
Part 1: An Uncommon Activist
At first I thought I was fighting to save rubber trees,
then I thought I was fighting to save the Amazon rainforest.
Now I realise I am fighting for humanity.
Chico Mendes. That man is a good place to start. Or at least, his death. Gunned down in his home out in the wild west, almost as far west as you can go into Brazilian Amazonia.
Barefoot and illiterate, growing up into colonial serfdom, it was all Chico knew since before he was ten years old to be out in the rainforest tapping the rubber trees. But when news of Chico’s death reached a certain violinist in London, it would turn his life around and launched him on a collision course with IPCC Working Group III. The onslaught against the Working Group began in 1993 and continued through the next two years as the co-chairman, Jim Bruce, tried and tried again to get the Second Assessment Report over the line. He nearly didn’t make it.
Protests against the method of costing the damages of climate change in this Report’s Chapter 6—where the death of the world’s poor is valued much less than the death of the rich—turned a large grouping of poor nation delegates against the Report, against the authors, and against the rich nations from whence they came. A wedge driven deep in the fault line already opening between rich and poor nations at the climate treaty talks, the Price of Life Controversy was orchestrated by one man, our violinist, Aubrey Meyer.
This unlikely course of events began back in 1988 when Meyer was seeking a theme for a new musical. He could hardly have missed the reports of Chico’s bloody demise as they came through on the eve of Christmas. At the end of a year when global environmentalism broke into the mainstream as never before, the news was everywhere; for this humble rubber tapper, born a nobody, died famous, world famous.
What began with a determination to preserve the livelihood of the local tappers, by 1985 had converged with the global campaign to preserve the entire Amazon. Advocating the sustainable development of the forest that sustained them, the united rubber tappers of Brazil formed under Chico’s leadership to become the cause célèbre of the global environmental campaign to preserve not only the Amazon but threatened rainforests everywhere. The rise and demise of Chico Mendes captured the imagination of the entire movement – a martyr to environmentalism immortalised in prose, film and song.
Indeed, this Amazonian tragedy held Aubrey Meyer captive that Christmas, but there never was a Chico Mendes musical. Instead, the tapper’s story sparked the musician’s epiphany, launching his life in an entirely new direction. Anyone who has ever heard Meyer speak will tell you that the passion for music never left him. But soon Meyer began to discover new talents, acknowledged by friend and foe, as he threw himself into the services of Chico’s cause—a cause that is as much about defending the global environment as it is about defending the rights of the poor.
When Meyer’s own brand of activism arrived at the climate talks, it was seen to be threatening what others saw as the greater purpose—a general agreement for action on climate change. His aggravation of this rich-poor split seemed to delight parts of the business lobby as much as it frustrated the environmental establishment. Most of all, Meyer’s intervention exasperated the expert economists drafting Chapter 6. As we shall see, the dispute was never really resolved. When the controversy was over and the Report published, David Pearce, the coordinating lead author, remained insulted and perplexed that their expert assessment could be called into question by the government delegations due to the confused and spurious reasoning of this enthusiastic outsider with his ‘silly campaign of misinformation and abuse.’ In fact, to his dying day, Pearce remained convinced not only that Meyer served the interests of the coal lobby, but that they were funding the whole absurd charade.
Aubrey Meyer and the Global Commons Institute
Meyer began his activist career campaigning for all those like Chico whose only wont is to continue living sustainably under the rainforest canopy. The movement aimed to protect the home of ‘the forest peoples’ against the loggers, rancher and broad-acre farmers keen to tear it all down. It was through campaigning around a petition called ‘Save the Forests, Save the Planet’ that Aubrey Meyer’s name became familiar to the letters page of The Guardian. Then in 1990, influenced by the 1st IPCC Assessment and the 2nd Global Climate Conference, Meyer broke away from the UK Green party that he had joined two years earlier, and away from his work for the preservation of primitive ways of life. Now convinced of the overwhelming urgency to tackle the climate problem, he set up a new group still advocating for the world’s poor, but now for their economic advancement and in the emerging arena of the global emissions treaty negotiations.
With greenhouse gas emission rates generally reflecting levels of energy production, Meyer was not the first to point out that emission rates are a fairly direct indicator of levels of economic development. Upon this uncontroversial fact Meyer’s campaigning would now be grounded: any insistence on poor nations to cut emissions is tantamount to refusing them the opportunity to climb out of their impoverishment. (Indeed, his activism in this field continues to this day in his advocacy of ‘Contraction and Convergence.’)
A new petition pointed out that it is the already-developed countries ‘who created and who continue to exacerbate this global crisis,’ while ‘the majority of the people are struggling to meet basic human needs.’ While the majority are too impoverished to generate more than the minimum of emissions, it is the ‘luxury-based activities‘ of the richer nations mostly causing the problem. Petitioning for rich countries to take responsibility and to take immediate corrective action, Meyer’s group succeeded in collecting nearly 50 signatures from UK parliamentarians. And they might well have achieved similar support across continental Europe as they pointed the finger squarely at the USA, the greatest offender, for its refusal to commit to any emissions target.
Thus, we find Meyer, active early in the stand-off with the USA—a full two years before the Rio Earth Summit introduced the climate treaty framework. And we should remember that the US resistance would only be accentuated by the ascendance of the Clinton-Gore Administration in 1993. While the environment movement and a strengthening science lobby were working for climate action in concert with a sympathetic administration, the US Congress dug its heels in, refusing to even consider any emissions agreement that did not include an immediate commitment from the poorer nations. Lobbying on the other side was this tiny group of activists pamphleteering out of Meyer’s cramped London digs when they were presented with a whole new opportunity for engagement.
A Rich Man’s Bias
In November 1992, at its first general meeting after the Rio Earth Summit, following a presentation by the IPCC Chairman, Bert Bolin, the IPCC had decided to reform its Working Group III for its 2nd Assessment so as to give its entire focus to the neglected ‘economic and social dimensions‘ of the problem. This is how the IPCC contrived the belated entry of the economists. Not that their new ‘green economics’ was exactly ready for assessment. A new method of accounting had only recently been formulated to incorporate environmental value into the equation of wealthy economies. At the end of 1992 this was less than half baked, with only a few incomplete recipes rushed to the table. Yet, within the policy space suddenly opened up by the new treaty framework, there was now a burning hunger for global Cost/Benefit evaluations to support global action. The selected expert authors could do nothing for it but rush though the simultaneous publication and assessment of their first feeble attempts to globalise their earliest erratic estimations.
Meyer was already familiar with this ‘sustainable development’ economics and the first push toward a globalised analysis. In fact, he named his new group, the Global Commons Institute (GCI) from a chapter heading in David Pearce’s second book on ‘greening the world economy’ (Blueprint 2). Along with other NGOs, the GCI attended the inaugural Plenary of the newly re-constituted Working Group III in May 1993. There they forged alliances with poor nation delegations who advocated for their continuing participation. In response, Bert Bolin invited the GCI to present a paper at one of the Group’s workshops on ‘equity’ that following November.
For Working Group III authors, a pushy NGO proved hard to avoid. The climatologists of Working Group I might well complain, but our economists never had it so easy. Whereas for Working Group I the NGOs were permitted little more than feedback on their drafts, for Working Group III interest groups were encouraged to participate at scoping sessions and exploratory workshops. This opportunity was not wasted on the GCI. Meyer even boasts of a successful campaign to block the selection of perhaps the most obvious candidate to lead the damages assessment, William Nordhaus. He had published the first, rather circumspect, global damages estimation in 1991. And even before any draft was circulated for review, the GCI was already petitioning against the methodology of its authors. This early involvement explains how the dispute first broke into a public controversy so early. In fact, it broke before the Working Group Plenary convened for the line-by-line approval of the Policymaker’s Summary (July ’95 in Geneva—the WG III equivalent of WG I’s Madrid). It broke before the government delegations had even been sent the final draft of the Chapters. And it broke at a much grander forum.
The first Conference of Parties to the UN Framework Convention on Climate Change (FCCC) had long been set for April 1995 in Berlin. We have now just passed ‘CoP18’ (Doha) with hopes of an outcome subsiding, but the momentum leading into the first CoP was so overwhelming that disruption by sceptical opponents and vested interests was proving difficult. Indeed, nothing so threatened agreement than a letter sent by the Indian delegation to its fellow poor nation delegates about a rich nation bias in the approach taken by the IPCC. In the letter the Indian Environment Minister, Kamal Nath, explains how this bias is exemplified by the very methodology of the studies underlying our Chapter 6. This chapter’s analysis is not only ‘absurd and discriminatory’ but it demonstrates ‘the bias which underpins [the IPCCC] assessment intended to provide the basis for policy discussions at the CoP.’ They called on other delegations to support them in their efforts in Berlin to have the ‘misdirection’ of this ‘faulty economics’ to be ‘purged from the process.’ (source: pdf)
The ruckus in Berlin that April led to an entire bloc of delegations at the Working Group Plenary in July refusing to accept neither the Policymaker’s Summary nor the underlying Report unless Chapter 6 were changed. The Chapter authors held fast in rejecting such intervention as against the IPCC rules. They would not change the Chapter and nor would they accept a Summary that contradicted it. They did agree in a side group to a re-drafting of the disputed passage of the Summary. But, when this was submitted to the Plenary 10 minutes before it was meant to close, the protests began and the meeting collapsed with the matter entirely unresolved. Even after reconvening in October, when approval was nominally achieved, the authors never accepted the Summary and the debate continued in the press, with calls on both sides for the Chapter to be completely excised from the published report. How had it come to this?
The Economic Value of Life
The task set for Chapter 6 was to assess the research on ‘The Social Cost of Climate Change.’ This is about estimating the damages that climate change is likely to cause—to give it a monetary value. The purpose of such a costing would be to weigh up the benefits of committing funding to strategies of adaption or mitigation. A full Cost/Benefit Analysis (CBA) of climate change requires giving an economic value to that which we indeed value, but which is fully, or partially, outside the market—and this is where sustainable development economics comes in. Previously, natural resources, for example a rainforest, would be attributed little or no economic value. That is to say, a forest’s full value, as it stands for now and the future, would not find expression on the accountant’s ledger. The idea is that if the full value were somehow expressed in the economic system then this would aid the preservation of those forests that the society considers worth preserving.
Not only forests but other non-market values can be given a ‘market-value-equivalent’ in various way, usually by establishing a ‘willingness-to-pay.’ By somehow determining what people might be prepared to pay for a non-market value, market equivalence can be achieved. And likewise for damages—or the loss of value—damages can be determined by finding out how much people are prepared to pay to avoid the loss. This brings us final to risk, where we can determine how much folks are prepared to pay for assurances against the risk of a loss.
One social cost of climate change outside the market is human health and wellbeing. This is something for which we are willing to pay a great deal. And dominant in the economic assessment of health is what we are prepared to pay to avoid death. This should not be thought of as how much an individual would pay to avoid certain death, rather it would be how much an individual or society would pay to avoid an increased chance of death. Once such an economic ‘Value of a Statistical Life’ (VOSL or VSL) has been determined, it can be used to calculate the value of risk reduction. Such calculations are often implicit behind individual choices over spending on safety measures and insurance, and they are often explicit in the determination of safety standards for food, drugs, vehicles, buildings, infrastructure and so forth.
Now, if we return to the problem of climate change damages, it has been assess that the doubling of the atmospheric CO2 concentration will lead to a few degrees of warming, and that the direct effect of the extra heat on human health will net more than 100,000 extra deaths per year. The task of assessing this ‘damage’ is to calculate a total economic value for these lost lives. Aggregations of this valuation with other damage estimates can then serve for comparison with the cost of various ways to reduce, or eliminate, these losses through mitigation or adaption. And it turns out that in these early attempts at climate change damages assessments, the valuation of lives is generally so great and so variable that it alone could determine whether the overall level of damages comes in above or below the cost of the various expensive proposals for mitigation. Thus, if we subscribe to this methodology, then the determination of the economic value of a human life becomes critical not only to the determination of how dangerous is climate change, but also the determination of what to do about it.
For many years prior, the economic valuations of life had been used in the Cost/Benefit Analysis of health programs such as inoculations and screenings. Since the 1980s it has been used to justify taxation on tobacco and it also started to appear in the sustainability problematic of wealthy nations—where the costing of morbidity and mortality is accounted into the benefits of pollution controls. In these sorts of cases the economic value of life is usually deemed constant across the economic system in which it applies. However, with the new global problem of climate change, to be addressed by a global treaty, a new global CBA requires a variability in the valuation of life more or less in accordance with the relative wealth of the local economy. The variability is due more to differences in ability to pay than to any differences in willingness. And it is with this requirement that the Price of Life Controversy began—with the tables of the differential value of a human life given in US dollars and effectively determined according to the relative wealth of nations.
The problem for the Chapter 6 authors was that no such tables existed—well at least they had yet to appear in the peer review literature. Indeed, climate change damage costings were generally only found in studies of rich nations, notably the USA. However, the doctoral dissertations of two of the Chapter’s junior authors (Tol & Fankhauser) were global, and did tabulate differential values of life. It was these tables, and only these, that were used in the Assessment. With the supervisors of these dissertations leading the writing of the Chapter (Pearce & Vellinga), the occasional attempts by Pearce (and Bruce) to distance the assessors from the research being assessed—and so from responsibility for these controversial calculations—proved difficult to sustain. And so when it was revealed that wealthy westerners were found to be 10 or 15 times more valuable than the impoverished masses, it is not surprisingly that the (leaked) draft Report soon attracted some embarrassing headlines, like this one:
This feature article appeared on the eve of the July 1995 Plenary in Geneva that was supposed to (but failed to) accept the Working Group’s Report. New Scientist had picked up the story much earlier, with Fred Pearce’s first report from Berlin (1Apr95) opening with this rhetorical embellishment:
Is the death of an overweight American from heatstroke a greater loss to the world than a Bangladeshi farmer struck down by a tropical cyclone?
He continues prophetic:
Economists advising the world’s governments on how to cope with global warming say yes. And their answer poses a new threat to the climate negotiations beginning in Berlin this week.
A week later New Scientist reports on a speech in Berlin to a municipal leaders meeting by ‘a prominent green economist,’ Paul Ekins of Birkbeck College London, where he describes the damage assessment as the ‘economics of the madhouse.’ Of course, at this stage the report was not finalised—circulating in a draft clearly marked ‘not for quotation’—but it became public property after the Indians brought the GCI campaign to the treaty talks in Berlin.
What made matters worse for the GCI was that after applying these valuation schemes, the total damage bill turned out not to be so alarming—the annual damages at a doubling of CO2 would be no more than 2% of global GDP. Damages of that magnitude could easily support moderately costed steps to mitigation (especially ‘no-regrets’ efficiency measures) but hardly the drastic immediate action that the GCI and other activists were demanding. So, not only was the devaluation of the poor lives taken as demeaning, but this analysis appears to get the rich nations off the hook for all the pollution they had caused in becoming wealthy—and that they continued to cause in staying wealthy and healthy as the globe warms. That, at least, is how the GCI called it, and the argument was catching. The Guardian explains how the draft report purports to show…
…that the cost of reducing greenhouse gas emissions would probably be greater than 2 per cent of Gross World Product (GWP). While the losses if greenhouse gas emissions were not curbed would amount to only 1.5 to 2 per cent of GWP. The implication, Aubrey [Meyer] argued, was that if these figures were allowed to stand it would mean that the world community would do very little to slow the warming because it would believe it was cheaper not to.
[by Douthwaite, 1Nov95]
The author of this newspaper report is in fact a member of GCI but other journalists and delegates would also follow the GCI lead in making a direct comparison of these two figures from two parts of the Assessment—mitigation costs (>2%) against annual damages at 2xCO2 (1.5 – 2%) — a comparison that is not entirely fair (as Pearce would later explain). All the same, the conclusion is more or less right: the total damages are assessed in a range that goes nowhere to support actions beyond those that are either cheap or that we might do anyway for other reasons. Whereas, if all life were valued at the rich country rate, or in according to different criteria suggested by the GCI, then the damages due to Climate Change would be assessed much higher, and so they would justify the more drastic and expensive action aimed at stopping global warming altogether. Unfortunately these alternatives methods of calculation were not in, or supported by, the peer review literature. On this bases alone the Chapter 6 authors could, and did, refuse repeated demands to include these alternative calculations in their Assessment.
What further infuriated the poor nation delegations was that the IPCC Report also assessed that climate change would have a much greater impact on impoverished and agrarian cultures, with the body count in the developing world far outstripping the count among the air-conditioned rich. Thus, not only were the Global CBA calculations suggesting that it would be cheaper to take very little action to slow the warming, but it would be cheaper… because…well…because saving the lives of those thousands of poor folks just ain’t worth it. That this discrimination in the accounting of lives conveniently serves the interests of the rich-countries is made explicit in the GCI’s formal response to the first draft of the Assessment:
The key question which now also arises is this: are all human lives equally valuable or not? Moreover, should economists employed by the nations responsible for causing the problems of climate change, have the job of valuing the lives which are going to be lost? And even more to the point, should they value the lives of the people who are not responsible for creating the climate changes, as less valuable than the lives of those responsible? Surely we all have a fundamentally equal right to be here: surely each person is equally valuable in this fundamental way? So far the global cost-benefit analysts say no, this is not the case.
Uncertainty and the Economics of Genocide
In his critiques, Meyer also elaborated concerns about the level of uncertainty. Even if we accept the methodology of Global CBA, the Report appears to ride roughshod over the layers and layers of uncertainty and the gaping holes in the data (see Meyer and Cooper 1995 pdf ). These inadequacies are indeed elaborated in the Report to such an extent that they seemingly preclude a quantifiable result within any meaningful range. Yet, a positive result is declared, it is well defined and it is presented unqualified by a confidence interval.
In the introduction to Blueprint for a Green Economy [1989, p 13-14] Pearce reminds us that any uncertainties about economic impacts of greenhouse gas emissions ride on top of the uncertainties about regional impacts on sea level and climate (he mentions the limitations of the climate models), and these in turn ride on top of the uncertainties about the climate sensitivity (he mentions especially the problem of cloud feedback). Yet, in Chapter 6 the economic damage resulting from 2xCO2 is presented in a precise range of one two hundredth of GDP. Even if the expected impacts of the business-as-usual scenario are taken as given—as solid, definite certainties—then equating 2xCO2 with 1.5% to 2% damage to GDP still remains an incredible declaration when we consider the level of success that economists have in predicting other impacts on GDP more than a few years in advance.
It was not only the GCI who were concerned this quantification of damages within a 0.5% range might mislead policymakers. Others began to speak out, including Michael Grubb from the UK RIIA and a lead author of the Report’s Chapter 2. Grubb is quoted in the press saying that this damages estimate is ‘ridiculously definite.’ He considered that such an accurate assessment at this time is impossible. And the inter-governmental Plenary seemed to agree. But when they agreed to replace the figures with the words ‘a few percent,’ Pearce was outraged. While Tol was fighting on the floor the various distortions and interpolations introduced under GCI influence into the Summary for Policymakers, it was the removal of this aggregate damage estimate that angered Pearce the most. He saw the removal of these figures from the Summary as a direct attack by a misinformed Plenary on the scientific integrity of his report—and their removal remained Pearce’s principal concern long after publication [see here].
If Pearce was fighting for the integrity of the scientific process in the making of the Assessment, Meyer was fighting against the use of definitive quantitative statements in a pretense to scientific precision. And to what effect this pretense? Whether consciously or not, this pseudo-science could easily serve to legitimate a diabolical crime. ‘If IPCC puts its imprimatur on this material by publishing it, this unsafe and discriminatory data will become official advice to the UN negotiating process.’ Not only would this send the wrong signal about action on climate change, but publishing Chapter 6 would provide the rationale for sacrificing the poor to the unabated economic advancement of the rich. In fact, Meyer goes as far as to call this ‘the economics of genocide’:
The calculations the governments are being asked to endorse are profoundly unreliable and could provide an excuse for them to do nothing. By placing such a low value on the lives of most of the world’s people they seem to endorse the economics of genocide.
[quoted in The Independent on Sunday, 23Jul95 ]
Is this really what sustainable economics amounts to? The blueprints for universal and sustained prosperity is realised into the cold-hearted reasoning of an Orwellian nightmare. How could this UN process have come to this horror so soon after launching onto the world stage that marvelous vision for a prosperous common future on this planet?
…continues with Enter the Economists Part II: Channeling Sustainability Enthusiasm
It’s difficult to find knowledgeable people about this topic, but you seem like you know what you’re talking about!
The report notes many observed changes in the Earth’s climate including atmospheric composition, global average temperatures, ocean conditions, and other climate changes.
“The economics of genocide.” Alarmist? Sounds pretty rational and down-to-earth to me.