Recognizing that nature is not a natural category need not be an impediment to consensus. It can open more space for human expression and creativity. Seeing how knowledge and technologies are constructed does not disable us from making better- worse judgments. We just have different tools. Admitting uncertainty need not block all action. Precaution can be seen as a starting point for seeing fresh alternatives. A critical approach to environmental knowledge may reveal systematic biases, e.g., neglect of social science evidence about risk at WTO. 10/3/11ESPP-78 1 Environment and economics A particular way of modeling environmental problems and solutions History How did we learn to think in this way about the environment? Components of Economic Model Modeling institutions (government vs. market) Modeling human behavior (incentives, information) Modeling nature (externalities, ecosystem services) Questions How good is the economic model? What are its most salient deficiencies? What implementation problems and opportunities does the model present? 10/3/11ESPP-78 2 Economy A recent term Pervasive: green, fuel, bio, hydrogen, renewable Forgotten history (cf. Mitchell 2002) Calculability Institutions Relations of power (whose exchange values prevail?) Not mere construction/representation 10/3/11ESPP-78 3 10/3/11ESPP-78 4 10/3/11ESPP-78 5 Makes unseen environmental costs visible ( externalities ) Allows comparison with benefits (already monetized): cost-benefit analysis Enables comparison of unlike activities (based on use and degradation of same natural resources) Offers instrument of global environmental governance (world environmental market) Produces measures for better accounting (ecosystem services, ecological footprints ) 10/3/11ESPP-78 6 Economics is a model of human (and organizational) behavior Economics is descriptive (is) and normative (ought) Basic elements Behavioral theory: utility maximization Normative assumption: efficiency is highest good Analytic strategy: weigh everything relevant in economic terms Decision rule: pick cost-effective solution (regulation) or allow cost-effective solution to be picked (market) 10/3/11ESPP-78 7 Features of regulation Style: command and control Assumptions Perfect information (but see TSCA) Adequate state capacity (analysis, design, monitoring, control) Sufficient political will (capture, resistance) Features of market Style: entrepreneurial Assumptions Incentives drive behavior (buy-in) Releases creativity from below (performance standards) Can get pricing right 10/3/11ESPP-78 8 Allocating costs of information Whoever introduces a new product should demonstrate its safety (e.g., FIFRA of 1972) Whoever releases a pollutant should tell the public what it is releasing (e.g., Toxics Release Inventory of 1986) Allocating costs of clean-up Whoever damages the environment should be responsible for clean-up: polluter pays principle (e.g., Superfund law of 1980) Allocating costs of unequal performance Whoever needs to emit more should trade with whoever is emitting less (e.g., carbon offsets under 1977 and 1990 Clean Air Act amendments) 10/3/11ESPP-78 9 This is how people do behave this is how people should behave Rationale for deregulation Justification for creating new markets Privatization (of water, for example) Tradable permits (in carbon, for example) A self-fulfilling model: problems are explained in terms of market failure Reform efforts tend to remain inside the model (single-loop learning) 10/3/11ESPP-78 10 10/3/11ESPP-78 11 What counts as a demonstration? A single substitution of trees for cooling tower How is the service calculated? North or south planting Stream angle Species of trees [cf. Cronon, wrong nature] Who makes the calculations? Rise of private consultancies What does not get asked? 10/3/11ESPP-78 12 The discount rate debate Foundations for discounting People prefer the present Marginal utility of consumption lower in future Uncertainty Technological change Largely an argument about practices of economic analysis Is discounting ethical or scientific? 10/3/11ESPP-78 13 Recognise that for climate policy-making institutional limits to global sustainability are at least as important as environmental limits. Employ the full range of analytic perspectives and decision aids from the natural and social sciences and humanities in climate change policymaking. Direct resources to identifying vulnerability and promoting resilience, especially where the impacts [of climate change] will be largest. 10/3/11ESPP-78 14