Economic approaches to Sustainability: Goals, Principles and Practices

Goals?

Opening Policy Windows ➲ Problem stream ● Defining existing condition as a problem ● Getting policy makers to accept definition ➲ Policy Stream ● Develop consensus around policies necessary to solve problem ➲ Politics stream ● National mood; leading politicians accept gravity of problem and willing to implement necessary policies ● Activists Fight Green Projects, Seeing U.N. Plot Activists Fight Green Projects, Seeing U.N. Plot ● Focusing events ● Financial crisi? Sandy?

Problem Stream ➲ Ecological economics in general? ● Scale ● Distribution ● Efficiency ➲ Examples from your papers? ● GDP? ● Food and water systems? ● Monetary system?

Policy Stream: Tools ➲ Prescription ➲ Payments ➲ Penalties ➲ Property rights ➲ Persuasion ➲ Power ➲ Concrete examples from your macro pieces?

Current Events ➲ Switzerland's Proposal to Pay People for Being Alive ➲ Yellen to Back Stimulus Plan in Remarks to Senators ➲ New Catfish Inspections Are Posing a Problem for a Pacific Trade Pact

Policy Stream: General Design Principles

Every independent policy goal must have an independent policy instrument ➲ What should our policy goals be? ● Sustainable scale ● Just distribution ● Efficient allocation ● Others? ➲ Example of scale policy detrimental to distribution? ➲ Examples of policies that meet several goals?

Macro control with maximum micro-level freedom/variability ➲ 2 types of freedom ➲ Is micro-level freedom always appropriate? ● ESA, POPs, HCFC-22, Fracking, etc. ● Essential and non-substitutable resources ● Electricity, water ➲ Incentives (payments, penalties) vs. prescription ● Empirical evidence is critical ● Human behavior is key ➲ Examples from projects?

Leave a Margin of Error When Dealing with the Biophysical Environment ➲ Uncertainty and Irreversibility ● Climate change ➲ Precautionary principle ● Europe vs. US ➲ Is democracy appropriate when we live close to the edge? ➲ Other examples?

Start from historical conditions ➲ Market system ➲ Existing property rights ● Create property rights were none exist vs. taking away/changing existing rights ● Tax rent (unearned income) when property rights exist ➲ Public property rights ➲ Government regulation ➲ Sovereignty and international policies

Adaptive management ➲ Complex adaptive systems or simple deterministic systems? ➲ Uncertainty ➲ Evolution (ecological and technological) ➲ Need to change our policies as we learn more and as conditions change ● Treat policies as scientific experiments ● E.g. policies implemented after great depression

Institutions at the scale of the problem (subsidiarity) ➲ Global reach of financial markets and financial contagion; climate change; oceanic fisheries, etc. ➲ Decentralized decision making for decentralized problems ● The market is a decentralized decision making process for activities that affect only individuals

Policy sequence ➲ Scale ● determines how much there is to be distributed ● Requires end to economic growth ➲ Distribution ● Pareto optimal outcome possible from any initial distribution ● Must be decided before allocation ➲ Allocation

Politics Stream ➲ Focusing events ➲ National mood ➲ Changing administrations ➲ Getting politicians to accept gravity of problem, implement necessary policies ➲ Any examples from projects?

Focusing events ➲ A Jolt to Complacency on Food Supply ➲ South Florida Faces Ominous Prospects From Rising Waters

National Mood ➲ G.O.P. Maps Out Waves of Attacks Over Health Law

Policy Stream ➲ Persuasion: Campaign Seeks to Recruit Top Students to Become Teachers ➲ Power: Voter Suppression’s New Pretext ➲ Property rights: Patenting Their Discoveries Does Not Pay Off for Most Universities, a Study Says ➲ Penalties: JP Morgan Pays ➲ Payments: Why Food Stamps Are a Great Investment ● As compared to tax breaks for lavish business meals

State of the Political Stream ➲ Huge changes in concern over just distribution ● Income Inequality May Take Toll on Economic Growth ● Workers Must Get a Bigger Slice of the Pie ● To Reduce Inequality, Tax Wealth, Not Income ➲ Decreasing concern over environmental issues ● May be changing ● In Poll, Many Link Weather Extremes to Climate Change

Why are we failing on the political stream? ➲ Strong media coverage of climate change skeptics? ● NYT headline: “Use Energy, Get Rich and Save the Planet” ● “Dissenter on Warming Expands His Campaign” ➲ Influence of large corporations? ● “Online Cloud Services Rely on Coal or Nuclear Power, Report Says” ● Powell Memo and ALEC ● “Embarrassed by Bad Laws” ➲ Media emphasis on unknown rather than known?

➲ Poor communication skills by scientists? ➲ Lack of advocacy by scientists? ● Journal article title: Dragnet Ecology--"Just the Facts, Ma'am": The Privilege of Science in a Postmodern World ➲ Lack of a focusing event? ● “the political system’s inability to address long-term challenges without a thunderous precipitating event “

How do We Open the Policy Window for Ecological Economics? ➲ Move beyond academia to think-tanks, advocacy and activism? ➲ Think tank approach ● Repository of policy pieces—for politicians and media ● Rapid dissemination ● Student involvement and leadership: Roosevelt Institute

➲ Problem based integration of research, teaching and service ➲ Strong policy focus ➲ Effective communication ● To policy makers, media, public ● Steady exposure, available, rapid response

Policies for Sustainable Scale ➲ Food system; GDP; Energy systems/waste; Money systems; Wetlands; ● Penalties ● Payments ● Property rights ● Prescription ● Persuasion ➲ How do we get politicians/public to accept policies? ➲ How do we deal with transboundary issues?

Policies for Just Distribution ➲ Projects ➲ Minimum income? ➲ Maximum income? ➲ Common ownership of our shared inheritance from nature and society as a whole?

Policies for Efficient Allocation ➲ How do we define efficiency? ➲ Scale, justice and efficiency

VCAT ➲ Commons assets trust (CAT). Third sector in addition to private and public. ● Resources “created or inherited together” ● “common assets essential to life” ● Why third sector? ➲ Legally binding mandate to use resources for the common good, for this and future generations ➲ Requires window of opportunity, not enduring political will

VCAT ➲ Vermont currently considering CAT legislation ● Directly influenced by Barnes’ Capitalism 3.0 ● Senate: 2007 ● House: 2011 ➲ VCAT :“proposes to make it clear that state policy is to protect certain common assets (such as air and water) for the benefit of present and future generations, and to establish a framework pursuant to which certain users of those common assets may be assessed fees that would be deposited into a common assets trust fund, which would be managed so as to protect those assets and serve the interests of present and future people of the state”

What? ● “ the list of assets that should belong to the people in common …include[s] natural assets such as undisturbed habitats, entire ecosystems, biological diversity, waste absorption capacity, nutrient cycling, flood control, pollination, raw materials, fresh water replenishment systems, soil formation systems, and the global atmosphere; and also to include social assets such as the internet, our legal and political systems, universities, libraries, accounting procedures, science and technology, transportation infrastructure, the radio spectrum, and city parks”

How? ● Create common property rights to unowned resources (e.g. waste absorption capacity) and publicly owned resources (e.g. airwaves, water) ● Tax away rent (unearned income), e.g. land tax ● Common provision of non-rival resources (e.g. information, culture and other public goods)

Allocation ➲ Access to rival resources (e.g. waste absorption capacity) must be rationed. Tragedy of open access ● “doctrine of res communes provided that the king could not grant exclusive rights of access to a common resource” ● Cap and rent (periodic auctions with no resale) ➲ Open access to non-rival resources (culture, information)

Revenue generation ➲ Annual permit revenue from 11% reduction in CO2 emissions: $720 million ➲ Annual auction value of broadcast airwaves: $375 million ➲ Annual increase in land values: $330 million ➲ Fiscal deficit: ~$110 million

Revenue expenditure: Dividend or Investments in Common Good? ➲ Example of CO2 permit auction ➲ Dividend: Pros and Cons (Conventional Wisdom) ● More politically feasible ● Rebound effect (via imports) but more equal distribution ➲ Investment: Pros and Cons (Conventional Wisdom) ● Greater CO2 reductions ● Regressive

Dividend would not redistribute wealth in Vermont

Political Feasibility: Vermonter Poll ➲ 95.2% Vermont’s atmosphere is a resource that belongs to all Vermonters equally ➲ 78.1% believe the atmosphere is threatened by pollution ➲ 82.5% believe individuals or companies should be charged money if they pollute the atmosphere

Political Feasibility

Efficiency Investments ➲ People are irrational ➲ $0.03/KWhr for efficiency investments in Vermont, vs. $0.12/KWhr for electricity ➲ Reinvesting the revenue into efficiency has 5-7 times greater impact on reducing carbon emissions than the price signal alone (Cowart 2008). ➲ RGGI results suggest that every dollar invested in energy efficiency and renewable energy yields $3-$4 in savings ➲ Investments targeting low income groups could improve sustainability and income distribution

Conclusions ➲ Important to move policies into practice ➲ One step at a time ➲ Must treat implementation as scientific experiments that test our hypotheses ➲ Institutions needed at scale of problem. VCAT is only pilot project