- Origins of climate change
- Climate scepticism
- The OECD
- The UN
- The ECB
- The Climate Crisis Advisory Group
- The US Supreme Court
- Texas power grid and cold weather
- Chilean winemaking
- Why countries should not manage their economies as households
- Ratings agencies
- Political lobbying
- Recycling (of batteries)
- David Wallace-Wells
- Young environmentalists
- The World Trade Organization
- Text errors
- Video – why Raworth? What is 21 Century strategy?
- Indicative solutions to questions concluding the chapter
Origins of climate change – what scientists, politicians and the extractive industries knew when and what they did about it
The most comprehensive account of the origins of climate change can be found in the work of Alice Bell in her book: Our Biggest Experiment: An Epic History of the Climate Crisis. The hyperlink goes to my book review. Students have a lot of history to catch up on in the short time they study at universities. Make sure this book is in the university library.
To be fair, I bought the book on the basis of Alice Bell’s Long Read published in the Guardian newspaper on 5 July 2021. It can be accessed here.
Climate scepticism has various flavours that are not mutually exclusive:
- conspiracy theory – climate change – despite all the evidence (scientific and experienced) – is a liberal hoax
- human-generated climate change is happening, but
- the science exaggerates the impact and the costs. A leading advocate of this thinking is Bjorn Lomborg. His latest book, False Alarm, posits that there is an optimal temperature rise (balancing economy and tolerable change). This temperature is 3.75 degrees Celsius above pre-industrial levels. The Paris Accord of 2015 sets a target of 1.5 degrees Celsius. There has never been a time in human history where the temperatures have been so high. To deal with such mis-information, readers should refer to Bob Ward at the LSE
- it is too expensive to do anything about it. This argument is made by politicians fearful of a backlash from electorates. It is exemplified by a story in the Sunday Telegraph, 8 August 2021
- developed countries have used carbon to industrialise historically and are denying developing nations the opportunity to advance their economies equally
- most carbon emissions are derived from countries such as China; carbon emissions from developed countries are small in comparison and it makes little difference to overall emissions and heating should cuts be made
Most scepticism relies on:
- a partial reading of existing data, studies and obligations
- decoupling of consumption in developed countries from manufacturing in the developing world to meet consumption demand of the developed economies
- ignoring the costs of not keeping temperatures to between 1.5 and 2.0 degrees Celsius
In the UK some of these arguments are evident in the lobbying by the Net Zero Scrutiny Group in the UK parliament, Global Warming Policy Foundation (GWPF), and the newly-launched campaign by Nigel Farage for a referendum on climate neutrality. The argument is that economies cannot afford the investment needed to reach net-zero by 2050. This only makes sense if the spending is always associated costs rather than investments. History tells us that human development is punctuated by – what we call – paradigm shifts. The oil era is one of those – displacing coal and steam as it did. We are now entering the renewable era in which some oil assets will be stranded; however, the investment in renewables enables new products and services, technologies and lifestyles. On this, the work of Eric Lonergan and Corrine Sawers is useful and immensely accessible. Their book, Super Charge Me: Net Zero Faster, helps to navigate difficult economic questions. They introduce the concept of EPICs – Extreme Positive Incentives for Change. Essentially these are interventions at all levels – state, corporate, business and individual levels that can get the world to net-zero on time.
The second danger of the scepticism is that some economists give the impression that economic activity will only be lightly affected in a warmer world, even up to 6 degrees of warming. This is unlikely as such modelling often misses the point that change has many trigger points. It is not a case of just being warmer, it is a case of extremes of heat, storms, disease and certainly migration.
The Organisation for Economic Co-operation and Development (OECD) has selected a new Secretary General Secretary. The outgoing head, Ángel Gurría (left), came to the end of his third, 5-year term in February 2021. What few people realised is how anti-carbon he has been throughout his tenure. This is a mark of how little we know and understand about the OECD – even those who watch and take note of international organisations. But as the climate crisis intensifies, what happens at the OECD will have a profound effect on future responses to climate change and life on the planet.
The OECD is a hybrid member organisation. Its rating of a country can impact on that country’s ability to borrow; it leads the way in developing and deploying indicators of economic wellbeing and can, hence, influence the measures used to quantify wealth, output and, ultimately, natural capital.
Outgoing heads often give valedictory speeches and Gurría is no exception; though his message is stark rather than triumphant. The task for his successor is “[to] protect biodiversity, to stop it from being degraded; to protect soil; to protect lands and water; to protect the oceans from the worst overfishing; to protect coral reefs, which are in danger of disappearing at 2C [of global heating]; to protect mangroves, which are extraordinary carbon sinks; glaciers and so on.” (quoted from Fiona Hardy’s report in the Guardian, 17 February 2021)
He was at the helm during and after the financial crisis in 2008 which he calls a missed opportunity to build-back-better, by which he means, sustainably. Instead of investment in technologies enabling sustainability for the world economy, governments selected austerity.
His departing message for 2021 is to urge global powers to put “a big fat price on carbon”.
The problem is, governments across the world are looking to build-back-fast after the pandemic, not better. There is huge pressure to kick start depressed economies and get people working and consuming again. This means energy – fossil fuels – and a General Secretary to push against sustainability.
Gurría’s successor was announced on 12 March 2021 – he is Mattias Cormann, former Australian Finance Minister. A firm advocate of the carbon economy – having abolished the Australia’s carbon pricing mechanism whilst maintaining carbon subsidies. However, in an interview last month with the Guardian newspaper he said that the OECD “can and must provide important global leadership to drive ambitious and effective action on climate change”. The UK supported his appointment.
The OECD is behind the plan for a global minimum corporate tax of 15%. This was agreed by G20 members at their summit 30-31 October 2021. In an interview reported in the Guardian (31 Oct), Pascal Saint-Amans, a senior tax official at the OECD, told the Journal [WSJ] the “pushback against globalisation that we’ve seen everywhere should also have been a pushback against tax multilateralism. But if you want to protect your sovereignty, what you need is tax cooperation.”
The UN secretary-general, António Guterres (left), has called on countries to make stop fighting nature. The UN has launched a report – Making peace with nature – on the triple emergency of climate change, loss of biodiversity and pollution. Air pollution is responsible for the deaths of 9 million people annually.
The report calls for GDP to be replaced as the measure of wellbeing as well as realistically pricing carbon (in line with the outgoing Secretary General of the OECD and an ending to fossil fuel subsidies. It also calls for a dramatic reduction in meat consumption.
It is also interesting that the UN is making an explicit link between the Covid-19 pandemic and humanity’s mistreatment of nature and its fauna – animals. Bats, in particular, are carriers of pathogens because of their metabolism and a unique mammalian resistance to the effects of viruses (Malm, 2020).
Malm, A. (2020) Corona, Climate, Chronic Emergency, Verso, London.
Picture: Cancillería Argentina
The European Central Bank (ECB)
Central banks are supposed to be institutions that use monetary policy to achieve economic stability – primarily inflation. In recent years they have used QE (Quantitative Easing) as a way of pumping money into the economy and boost investment.
Central banks are, however, extending their reach – something that is not entirely welcome. Few economist see climate change as having an impact on inflation. The current head of the ECB, Christine Lagarde has put climate change on her agenda calling it a “secondary objective”. She is considering Green QE – that is buying only gilts and bonds that are non-polluting. This is seen as illegitimate for a central bank – behaviour change is for governments.
Lagarde is not the only central banker engaging in “mission creep”. The Bank of England’s former governor, Mark Carney is a firm advocate of interventionist central banks. He delivered the BBC’s Reith Lectures in 2020 on the subject. There is also a grouping of central banks The Network for Greening the Financial System (NGFS) – has over sixty central-bank members, and supervisors working to change the financial system to reduce the costly financial risks that climate change presents.
Details drawn from The Economist, 28 November 2020.
Picture: European Parliament from EU
The Climate Crisis Advisory Group
The Covid-19 pandemic has required politicians to engage with scientists in the formulation of policy. In the UK a group of appointed scientists were brought together as the Scientific Advisory Group for Emergencies (SAGE). The record of SAGE was mixed in that the British Government did not always follow the advice. Moreover, it was difficult for the scientfic community more widely to engage because proceedings were held in secret, no minutes were published and even the members’ identities were a secret.
Arising from this a different set of scientists established what became known as Independent SAGE. The effect was positive, SAGE itself was opened up and the identity of the members made public. Independent SAGE, however, did what liberal democracy enables, and that is a critical voice from civil society to inform, criticise and work with the executive in making better decisions.
In June 2021, one of Independent SAGE’s founders, former UK chief scientific adviser Sir David King, is doing the same for climate, with a new critical group, The Climate Crisis Advisory Group. This group has an international membership – and hence is not focused on the UK Government, but governments more widely. It will issue monthly bulletins in a public online forum, chaired by BBC presenter, Ade Adepitan (right). Other key members of the group include the head of the International Energy Agency, Fatih Birol, and Johan Rockström, the director of the Potsdam Institute for Climate Impact Research.
Picture: Garry Knight – originally posted to Flickr as Ade Adepitan, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=11615463
The US Supreme Court
On 30 June 2022, the US Supreme Court ruled in a case known as WV v EPA. WV is West Virginia, one of the states that produces coal largely for electricity generation. The EPA is the Environmental Protection Agency, a federal body (i.e. a body whose responsibilities cover the who country) that regulates pollution and environmental damage by applying limits and restrictions. The Supreme Court makes judgments arising from legal challenges as to whether actions violate or otherwise the US Constitution. In this case, the state of West Virginia challenged that the EPA, in restricting allowable greenhouse gas emissions from coal power plants, was acting unconstitutionally. In other words, the EPA is acting unconstitutionally when imposing restrictions under the unratified Clean Air Plan from the Obama era. The lead justice argued the following as reported in the Guardian newspaper:
“Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible ‘solution to the crisis of the day’,” wrote Chief Justice John Roberts in the opinion. “But it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d). A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.”The Guardian, 30 June 2022
Whilst this looks decidedly specific and in no way nullifies all EPA “regulatory schemes”, it does signal to states and other bodies that the Supreme Court is of the mind to render unconstitutional environmental regulations across the board. Indeed, this particular challenge was supported by other fossil-fuel producing states including Texas and Kentucky.
In recent years, the US Supreme Court has been joined by three justices whose positions are economically and socially conservative. Justices are appointed by sitting presidents for a lifetime. In the presidency of Donald Trump there were three vacancies giving the court a 6-3 conservative majority. It was that majority that the Court used to undermine the jurisdiction of first-nation law on tribal lands and overturned Roe v Wade the previous week – essentially removing the constitutional right of woman to have an abortion. And again, on 30 June to strip away the EPA’s regulatory schemes. Hence the US Supreme Court is a significant actor in the fight against climate change. Its ability to render unconstitutional regulatory schemes has global implications relating to meeting the terms of the Paris Agreement. It is here, therefore, where firms need to use their buying power to force suppliers to comply voluntarily with limits on their emissions. Some notable companies supported the EPA against WV. These included Amazon, Apple and Google, all three of which have considerable renewable energy assets.
A popular advocate for degrowth is Jason Hickel. Hickel’s book, Less is more: how degrowth will save the world is a lively and well reasoned case for moving away from measures of capital wellbeing to measures of human wellbeing. Hickel is very good at expressing the meaning of degrowth and why we should not fear it.
However, degrowth has limitations. It is empirically untested and maybe untestable. A recent Twitter thread on this subject is offered by Oliver Simard-Casanova raises some critical talking points. Seminar leaders may consider designing a session around Simard-Casanava’s critique and the claims of degrowth advocates such as Hickel.
In chapter 1 we discussed the business imperative of adaptation – preparing the business or organisation for the anticipated stressed caused by climate change. The example of railway lines – expansion and contraction of steel rails – was used. With extremes of temperatures between summer and winter, even in the UK, the existing tolerances of steel are insufficient. Steel manufacturers will need to innovate their product to manufacture steel rails with a wider margin; for example, -10 degrees Celsius to +40 degrees Celsius.
An additional stark example of the implications of ignoring climate change has recently occurred in Texas, USA. Texas has experienced in the weeks of mid-February 2021 unusually cold temperatures coupled with a snow storm. Unusually cold, in this context, means between -12 and -15 degrees Celsius. The issue was not the cold per se, rather the collapse of the power grid. The power grid was not resilient. It was not equipped to operate with such temperatures. And whilst politicians were blaming wind turbines for the outages, the fact remained that the failure was fossil, not renewable. 90 per cent of the state’s electricity generation comes from fossil fuel, largely gas. It was the transportation of the gas (failed pumps, themselves using electricity) that failed. The wind turbines, it seems, held up quite well.
The cold weather was not the sole reason for the failure – this is where politics intervenes. First, Texas has its own grid – the rest of the USA shares two grid networks making it possible to share electricity should major generating capacity fail. This is purely political – a decision by politicians to be independent in a belief that an oil-rich state will never be short of energy. Second, the grid had suffered chronic under-investment in recent years. Again, a political decision based on risk calculations that are no longer valid or reliable. This is caused by the regulatory framework that limits the profits made by generators (popular with consumers until it fails) then impacting investment decisions.
In a time of climate change, going it alone – even for a huge state like Texas – may not wise. This is a global change in the climate, not a local one. The implications are stark as well. In the middle of a global pandemic, the weather disrupted the roll-out of vaccinations; however, the cold itself killed people in their own homes. There were reports of a man who froze to death in his own bed. Equally related, however, is the poor state of Texas’ housing stock. As the thaw starts, the water pipes damaged by the expansion of the water inside them when frozen, is releasing huge quantities of water damaging properties in the process. The State suffered a shortage of clean water during the freeze.
For colleagues looking for a comprehensive account of adaptation across sectors and regions, I recommend Simon Mundy’s recent book, Race for Tomorrow: Survival, innovation and profit on the front lines of the climate crisis. It is a big book and is the culmination of a world trip by the author and details adaptation efforts across all six continents and countries such as Bangladesh, the Philippines, Solomon Islands, Nigeria, Greenland, Mongolia, Australia, etc. One example of inspirational adaptation that is also particularly interesting from a business strategy perspective is Chilean winemaking. Chilean winemaking is a relatively new industry for the country and its farmers. But a changing climate has resulted in a long-lasting drought caused predominantly by deforestation. The farmers themselves are finding their yields (from what are largely French grape varieties) much reduced. There is less water rendering the grapes smaller. They are also prone to new diseases. Farmers are doing the following:
- relocating to damper regions
- experimenting with different grape varieties
- reworking blends to compensate for/enhance new flavours arising from smaller grapes
- deploying new irrigation systems (drip systems rather than blanket watering – similar to indoor vertical farming)
What is interesting about Chile is that – unlike the French industry – few people buy the wine because of a region, it tends to be the grape that they choose. These adaptations are easier to execute in Chile than they would be in France where region matters and the INAO – the body that validates the regional designations of wine and, indeed, the nature of irrigation in the industry. France, too, is being affected by climate change, so flexibility and adaptation is key.
Why states should not manage their economies like households
Politicians often say that all expenditure has to be paid for, so borrowing money to get by when times are hard should not be done because you cannot spend more than a county takes in through tax receipts. This neoliberal (see below) line of argument is false – and is particularly well critiqued by Stephanie Kelton (2020).
The Keynesian case is nicely summarised in this video
Ratings agencies such, as Moody’s, Fitch, and Standards and Poor’s, are influential bodies that grade firms and countries according to the reliability and financial security.
There is a new breed of ratings agency in recent years. These agencies rate companies on the basis of their environmental sustainability and stakeholderism (Environmental, Social and Governance, ESG). For example, Standard Ethics, a London-based rating agency, downgraded JP Morgen Chase, a US bank, on the basis of its €3.25bn support for the breakaway football super league in April 2021!
Jamie Dimon, JP Morgen Chase’s CEO had, in his annual Letter to shareholders, openly stated how the bank views the importance of community, businesses’ role in community building and inclusivity: “JPMorgan Chase has always recognized that long-term business success depends on community success, and that is one of the reasons for our enduring achievement. When everyone has a fair shot at participating – and sharing – in the rewards of growth, the economy will be stronger, and our society will be better”.
These words, deemed Standard Ethics, ran contrary to financing an exclusive league that effectively took out one of the biggest contributors to community, the local football club, from the community that created it.
Firms need to be conscious of existence and role of these new ratings agencies as investors are likely, progressively, to commission them to analyse environmental performance. Other examples include: sustainalytics, MSCI. Care is needed with ratings agencies because they do not all use the same methodology and differ on how they rate firm behaviour. For example, a firm’s products and operations can be highly rated whilst they provide donations to lobby groups that seek to undermine climate science and hence policy based on it (The Guardian, 20 December 2011).
Picture: By World Economic Forum – Flickr: The Global Financial Context: James Dimon, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=60200256
Firms and industry lobby politicians and officials. It is an industry in itself and legislatures have structures in place for this to take place. Clearly there is a legitimacy to this – politicians rely on the data and knowledge coming from industry insiders to make good policy. However, lobbyists have been behind some of the most damaging lobbying successes in recent decades. Lobbyists make the case for low taxes and reduced regulation – or put another way, lobby for liberalisation and self-regulation. The financial crisis of 2008 is perhaps a good recent example of the impact of liberalisation and reliance on industries to regulate themselves. The tobacco industry lobbied for many years against laws restricting access to cigarettes known to cause cancer. Lobbyists are busy, too, trying to restrict measures to deal with climate change, most notably, emissions. They have been backed up with money from corporations that have also funded projects explicitly to undermine the scientific case for specific emissions targets and real cuts. The so-called Climategate (chapter 4) is an example of this.
The Economist (15 May 2021) profiled lobbying by known corporations in the European Union. Collectively, they reported, Google, Facebook, Microsoft, Apple, Hauwei (Technology); Shell, BP, ExxonMobil (oil and gas); Bayer (pharma); and VW (auto) have a combined budget of 41.25 Euros (data from Transparency International EU). Power is diffuse in the EU, so such funds are necessary to navigate effectively the intricacies of the parliament, the Commission and the Council (heads of state).
In the UK, the so-called revolving door, sees civil servants moving from Whitehall to industry (and sometimes doing so at the same time) and ex-Prime Ministers lobbying existing ministers for private companies as happened with David Cameron and Greensill Capital (The Guardian, 11 May 2021). Most lobbying is more mundane. The power of argument – especially scientific argument – cannot be guaranteed to bring about positive legislation to deal with major challenges such as climate change.
In Gemany, the Economist (15 May 2021) reported on the revelations by Der Spiegel, the weekly newspaper, on the case of parliamentarian Philipp Amthor (left) being on the Board of Augustus Intelligence whilst being at the Ministry of Economics. Amthor had share options by way of compensation.
Picture: Tobias Koch – https://www.cducsu.de/abgeordnete/philipp-amthor, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=63640019
Recycling (of batteries)
In the climate debate, recycling is often used as a given. It is just a case of popping the waste into an appropriate basket and then sending it away somewhere to be reworked. Clearly for some products this is almost the way it happens. In the motor industry, most car bodies are sheet metal that can easily be – for want of a better term – melted down with most of the metal being rapidly re-usable, often as a new car or vehicle. Electronics are another matter, however.
Electronics – including batteries – contain materials such as rare earth metals, lithium and cobalt that are difficult to extract, but extremely valuable. There is, reports the Economist (15 May), a whole industry now engaged in recycling. There are two techniques, both with their advantages and disadvantages.
Batteries, for example, are flammable. They have to be handled with care. A shredding process creates a “black mass” that can be processed in two ways:
- pyrometallurgy – smelting to separate and extract metals including cobalt. It requires a lot of energy and some non-metallic materials such as graphite are destroyed. Lithium extraction requires a second process.
- hydrometallurgy – dissolving black mass in acids and allowing materials to “leach out”, including lithium. It is more complex chemistry and creates toxic waste.
A number of companies are engaged in this:
- Rewood Materials
- American Battery Technology
- Brunp Recycling
- SungEel HiTech
A good way of looking at the future is for batteries and electronics to be designed better in the first place. It has long been the case that products have been subject to the concept of “design for manufacture” – ensuring that what comes out of R&D can be translated effectively into a product in a manufacturing facility. The same is true of recycling. Batteries, for example, can be designed to make the extraction of rare-earth metals much easier.
This is a case study from Innovation scholar, John Bessant, who has written numerous books and articles, notably, Managing Innovation (with Joe Tidd). It is a very simple example of circularity. Take a common product, (1) use it (make coffee), (2) save/collect waste, (3) re-commodify it as mushroom compost; (4) repackage and resell.
David Wallace-Wells’ book, The Uninhabitable Earth: Life After Warming, is cited in the first chapter. Wallace-Wells can be heard on the New Abnormal podcast speaking to Molly Jong-Fast on 24 July 2021: 23:30 to 35:49
The text names three young environmental activists: Greta Thunberg, Louisa Neubauer and Hilda Flavia Nakabuye. Recently the Guardian newspaper (17 October 2021) profiled 20 influential activists, some of whom are genuine entrepreneurs, including Nakabuye. The genuinely inspirational profiles can be found here.
Their names are: Vic Barrett, José Adolfo Quisocala, Anjali Sharma, Noga Levy-Rapoport, Ella Meek, Fionn Ferreira, Marinel Ubaldo, Aadya Joshi, Lesein Mutunkei, Isabel Wijsen, Scarlett Westbrook, Melati Wisjen, Amy Meek, Yusuf Baluch, Iris Duquesne, Hilda Flavia Nakabuye, Disha Ravi, Autumn Peltier, Jamie Margolin, Mya-Rose Craig, Jakob Blasel.
World Trade Organization
The World Trade Organization (formerly the General Agreement on Tariffs and Trade, GATT) is a member organization that seeks to reduce or eliminate global tariffs in goods, services and intellectual property through negotiation. It organizes “rounds”, the current being the Doha round that started in 2001. The WTO subsequently regulates the terms of trade agreed between nations. It has 164 members (countries) accounting for some 98 per cent of global trade.
The WTO is headquartered in Geneva, Switzerland, employs in the region of 600 people and is led by a Director General and four deputies. The current Director General is Ngozi Okonjo-Iweala, a Nigerian economist with expertise in fair trade, development and environmental sustainability. The Doha round has a focus on equitable exchange between the global south and north. It has a governance structure is determined by its Ministerial Conference, composed of delegates from all member states. It meets every two years.
Recent developments are around so-called e-commerce plurilateral agreements (services) and Trade and Environmental Sustainability Structured Discussions (TESSDs). These are noted to be parallel agreements/discussions between member states rather than WTO agreements, but they have the potential to migrate to a global template.
A good source of information about world trade, including the WTO, is David Henig.
The text uses this phrase. I have used it in the text because it best reflects the dynamic that has brought humanity to the point of (climate) crisis. Its origins are in the so-called Austrian School through the works of Friedrich A. von Hayek (Road to Serfdom, 1944), Ludwig von Mises (Bureaucracy, 1944) and Karl Popper (The Open Society and its Enemies, 1945), Karl Polanyi (The Great Transformation, 1944). Its 20th/21st Century interpretations largely come from The Chicago School, led by Milton Friedman (Capitalism and Freedom, 1962). To varying degrees, these economists entrusted absolutely to the market the distribution of resources and the security of human welfare. There was room for the state in terms of law (defending property rights) and order, defence and money supply.
It is this so-called hollowing out of the state that occurs in the USA and the UK from the mid-1970s to the present day that has made it increasingly difficult for governments to intervene to rectify what is the biggest and most catastrophic market failure of modern times, climate change. In fact, neoliberal governments have written into trade agreements and treaties provisions that prevent the state from regulating actors in the market without being subject to legal challenge if the regulations affect the welfare (profits) of firms subject to them. This approach was written into the Transatlantic Trade and Investment Partnership (T-TIP) agreement between the United States and the EU. In the end, this was rejected by the EU, but is a feature of the recent trade agreement between the UK and Australia.
For those seeking a detailed and accessible discussion on neoliberalism, the Origin Story podcast is a reliable and entertaining source. Though it does contain bad language.
p4: “It’s now time for climate entrepreneurs to re-image the world economy…” should read: “It’s now time for climate entrepreneurs to re-imagine the world economy…”