The Politics of Climate Change

A primer for the last in ippr’s A Climate of Politics events series (9.00am, ippr, Tuesday 29 June 2010)

In partnership with Christian Aid and WWF-UK and with technical assistance from Cisco Systems, ippr - Political Climate’s parent organisation – has been grappling with the politics of climate change (rather than climate change policy). The final event in a series of five focuses on creating political space for more ambitious action on climate change. We hope this post – which is our interpretation of what we’ve heard so far – is interesting in its own right, but we also hope it will help get the debate going for those attending.

What have we learnt from the series, which has looked so far at the UNFCCC process and the politics in China, the US and the EU? There are perhaps four important lessons…

Lesson One: The UN negotiations cannot be the only game in town.

The process of treaty negotiation is still seemingly in the grip of post-Copenhagen paralysis. But there is much talk of how global climate strategy has to be built from the bottom up. In our first debate, Professor Steve Rayner of Oxford University’s Institute for Science, Innovation and Society argued elloquently that without robust national action focussed on investment in technology, it would be impossible to move forward internationally.

The bottom-up approach need not be pursued to the exclusion of the UNFCCC process. But it would seem that pressing for an international agreement before the political conditions in key countries have improved is no more likely to be successful now than it was at Copenhagen.

Lesson Two: China’s leadership is reliant on high economic growth rates.

Decision making in China is a lengthy process and so conventional summit diplomacy, in which leader peer pressure is presumed to raise the stakes, does not work. Also – unsurprisingly – growth and not environmental protection is the number one priority and so China is only likely to consider the latter where it either impedes or assists the former. So more ambitious action on climate change is likely to come from attempts to deal with other forms of more visceral environmental pollution or because climate-friendly technologies spur growth.

Lesson Three: The US needs a ‘plan b’ in case the Senate bill fails.

While it’s too early to give up on a Senate bill on energy (with perhaps some climate elements), the chances of failure are still high. Michael Schellenberger of The Breakthrough Institute argued that in order to stave off competition from China, the US needs to invest in technological innovation and that an investment-led approach funded using a modest carbon tax would be a good ‘plan b’.

Lesson Four: The EU needs to get its act together.

Economic crisis in Europe and its perceived loss of leadership during the Copenhagen meeting has forced the EU onto the back foot on climate change. But even prior to Copenhagen, the issue was not resolved inside Europe. We heard from Kzrysztof Bobinski how Poland’s leaders are largely uninterested in climate change as an issue in itself and how climate may only resonate in Warsaw if it becomes synonymous with energy independence from Russia. An EU-wide political strategy on climate change to galvanise the union into more effective leadership needs to have such thinking at its heart.

The Way Forward

Those of us who work on climate change have been guilty of focussing too much on inter-governmental politics rather than understanding the politics of climate change at the national level. While most people in most countries are far from being deniers, they are equally unready to suffer (any more) economic pain for the climate’s sake. And so governments in key countries lack a mandate for the kinds of swingeing policies necessary.

How can that be changed?

Keep calm and carry on: Alex Evans argued in our US debate that the impacts of climate change would ultimately be the driver of more ambitious action and that, like Churchill in the wilderness, we should ensure we’re politically prepared and in the meantime resist appeasement in the form of political realists.

Don’t mention the climate: Research conducted last year by ippr points to a reframing of the climate issue. The evidence from this and other polls suggests that people are strongly in favour of renewable energy, but less willing to bear the costs of a shift in energy technology, especially if the reason for doing so is to stop climate change.

Fight a different set of battles: Steve Rayner and Michael Schellenberger are both authors of the Hartwell Paper and both support the prioritisation of a different set of policies in order to address the politics. For instance, they argue that a focus on investment in clean technology rather than on taxing emissions will stimulate more support for policy.

Swords into shares of the atmosphere: Rather than reframing the debate or changing the focus of climate policy to fit where people are now, some, such as Tom Crompton, argue that we need to engage with people’s (consumerist) values and shape them for better environmental and social outcomes.

We mention these approaches not because they are an exhaustive list but because they epitomise where the debate on climate politics currently rests. They are clearly not mutually exclusive; in an ideal world we would pursue all of the above and more concurrently. But with limited time and resources, what should be our focus? Let the discussion commence!

Creative destruction – the missing link between inequality and climate policy

We were recently challenged on the question of how inequality can be reduced at the same time as the transition to a low carbon economy can be managed. We agree that both need to be addressed at simultaneously, since sharp inequality makes the politics of climate policy much more difficult.

My starting point is to argue that we first need to understand what is driving inequality. At the top end, it is clearly about the rise of finance, but in a recent pamphlet co-authoured with Adam Lent, I lay out the case that in much of the economy it is innovation that is the main mechanism.

Innovation does drive growth – there is now compelling evidence that what drives increased productivity and growth in living standards is not investment per se, or the development of this or that particular sector, but the process of innovation – not only technological but also managerial and institutional.

Indeed the enormous creative dynamism of capitalist market economies, and the huge growth that innovation has unleashed in the last 300 years, is the single most striking thing about capitalism. By contrast, much recent debate - both about the causes of the crisis and the right response to it - is still framed by the long 20th century struggle between market fundamentalism and those, including Keynesians, who reject the idea that markets are fundamentally stable and self-correcting if left to themselves and argue for a crucial role for the state to intervene to put that failure right.

This debate is important, espeically in the conetx of recovery from crisi or recession. But the reality is that neither free markets nor Keynesian demand management are in themselves guarantors of long term growth, As the growing sub-discipline of evolutionary economics emphasises, what is important about real economies is not their static allocative efficiency, but their dynamic potential.

But there is also a dark side to innovation. Schumpeter characterised it as “creative destruction”, and there are always winners and losers in the process. One effect is literally the destruction of jobs and obsolescence of investment as a result of technological change, most obviously in the period of deindustrialisation which followed the election of Thatcher at the end of the 1970s, but which has continued since. In 1978, a quarter of the workforce was employed in manufacturing, which is down to 8% since, despite the fact that the value of production has doubled. These changes are largely due to technical change.

The losers are not only factory workers, but all workers whose work is routine, and including clerical workers, and now, for example, supermarket checkout staff. The hollowing out of employment and stagnation of wages in medium skilled but routine work has resulted in the “squeezed middle” phenomenon which so many politicians have picked up on. By contrast, skilled workers whose productivity is boosted by IT (including in finance) have seen their relative wages soar since the 1970s.

The old left response to these forces was to resist them, but this approach was first broken by Thatcher and then abandoned by New Labour, which sought instead to compensate losers through redistribution from tax. Resisting innovation does not make sense, for it will suppress growth and the benefits of higher productivity. But the strategy of redistribution also comes up against limits, both political and economic.

We argue that instead we should be seeking to radically expand participation in innovation, to spread the gains as widely as possible, and put much more serious effort into helping people move from old to new jobs throughout their lives. This is about rethinking not just skills and training but also the purpose of social security. Taking innovation seriously also means seeing how disruptive it can be to society, and ensuring that, while technologies may become obsolete and companies may fail, the same is not true of people.

Finally, we also need to start to shape innovation more actively. Evolutionary economists argue that innovation in an economy is just like the evolutionary process in the natural world, where success is defined by how well species fit in to the environment.

In the economic world, that environment is crucially shaped by policy. For example, up until recently, there has been no incentive to direct innovation to low carbon technologies, and as a result we live in a world where dirty energy and transport is very cheap. But we can and must radically change the policy environment for innovation, redirecting creativity and entrepreneurship towards making clean energy cheap.