TWENTY
I spent some years as chief investment strategist for a hedge fund that specialized in investing in distressed companies—businesses that were circling the drain and were either bankrupt or dangerously close to going under. In that role, I served as director of a few of such companies once they were reorganized. I remember one where the board would regularly set goals for the CEO that he would have to meet to get his bonus. And I remember that he regularly achieved those goals—right up to the moment we once again filed the company for bankruptcy. This is how I view international efforts thus far to prevent catastrophic global warming. Nations might meet their goals, and we will still face a climate catastrophe.
The world has begun decarbonizing, but we need to accelerate the process greatly to avoid a climate disaster. The Green Deal announced by the European Union would have the political unit that represents the third-largest source of greenhouse gas emissions become carbon neutral by 2050. An aggressive goal, but consider what that means: nearly thirty additional years pumping more greenhouse gases into an already overburdened atmosphere. Even if the world met the terms of the Paris Agreement, we face further warming that would bring humanity into uncharted territory. A 3 degrees Celsius or more rise in global temperatures would produce a world hostile to farming, humans, and countless other creatures. This is where we are headed. This cannot happen. Stronger measures than far-off dates for carbon neutrality are needed to avert calamity.
It’s not just the United States that must drastically reduce its emissions, but most other developed nations as well. Moreover, emerging nations need to find a path to development that does not overwhelm efforts to decarbonize by other nations, as has happened over the past two decades during the industrial development of China, India, and other new economic powers. The atmosphere doesn’t care where emissions come from; it reacts to the level of greenhouse gases it bears. We need a tool that will create very strong incentives in every country to reduce net carbon emissions. We have that tool, though it is anathema to subscribers to the neoliberal economic order of free trade and open competition that has dominated globalization since the fall of the Soviet Union.
It’s called tariffs.
The previous chapters have tried to show the tremendous momentum of business as usual, regardless of the economic system. In the United States, the spreading and socialization of the risks of climate change tend to deflate any sense of urgency about the issue. Russia, a kleptocracy, has leaders who openly scorn the threat of global warming. So does the president of Brazil, Jair Bolsonaro: his tolerance of the illegal burning of the Amazon makes Brazil the world’s largest contributor of GHG emissions coming from deforestation. China, a state-managed economy, is now the largest purchaser of renewables, but it is also the largest emitter of greenhouse gases. And everywhere, even in nations with solid national policies, people cheat.
Here’s how climate tariffs would work. It is now possible to monitor greenhouse gas emissions by point of origin using satellite-based remote sensing technologies, and even more refined monitoring is on the way to meet the requirements of the Paris climate accords. That data could set a baseline of the greenhouse gas emissions of 194 nations. Then a percentage goal for annual reductions in emissions could be established following a short phase-in period, with tariffs adjusted based on success or failure to meet those goals (outstanding success should be compensated with credits). Following data collection, a nation might be given a warning and one year to cure the deficiency before tariffs are imposed.
The key is that the tariffs would be universal, with one set level for every nation on earth. Don’t get cute. As the history of climate negotiations has shown, specificity and exemptions invite gaming, endless negotiations, and cheating. Mali can achieve a 3 percent reduction from its base, for instance, just as easily as the United States from its base. Renewable energy now competes with or beats any fossil fuel on costs, and there are now many ingenious ways of reducing capital costs. New, scalable carbon capture technologies are coming online.
Nations could choose their own paths to compliance. European countries might focus on EVs and renewables, a continuation of what they are doing. Some nations might want to put a price on carbon. Sweden, for instance, prices carbon at about $130 a metric ton—four times the highest price yet reached in the EU carbon markets. Brazil might dramatically lower its emissions simply by controlling illegal deforestation in the Amazon, something it should be doing anyway. Indonesia could take a similar path, and its growing manufacturing sector would have a strong interest in making sure the country did not pay tariffs.
An across-the-board tariff creates an incentive within a country for competing interests to police bad actors. Tariffs at the national level would solve the free-rider problem that has dogged global warming initiatives from the beginning. Because of advances in renewables, EVs, and efficiency technologies, compliance on emission reductions will be easier than at any previous time in the climate change era, and it will be easier still as the buildout of renewable infrastructure accelerates.
Such a tariff regime could be created under a revised Paris Agreement in coordination with an existing international forum such as the World Trade Organization (which in its report The WTO at Twenty recognizes that climate change is an issue it must address). Tariffs could be collected by the importing nation and then be pledged to an international finance institution such as the World Bank, and the money could then be allocated to clean development projects directly targeted to reducing emissions in the poorer states. The fact that every nation has to meet its emission targets or be subject to tariffs would help prevent the counterproductive diversion of money that characterized prior international attempts to fund clean development.
The Trump administration’s retreat from international obligations actually made it easier for a climate tariff regime to be implemented. Even though Biden has made a priority of reengaging, the Trump years gave other nations the opportunity to think about an international order without U.S. leadership. Emboldened nations, such as France, have already threatened to impose tariffs on some U.S. goods because of our retrograde climate actions of the past four years. A global problem such as climate change demands collective action, not a piecemeal approach. So far, the collective actions tried have been all carrots but no sticks. And, demonstrably, they haven’t worked.
Tariffs could provide that missing stick. I expect the proposal will horrify economists because of the long history of beggar-thy-neighbor tariff case studies. It should be clear, however, that this would not be the case with a universal tariff. The regime would not be one nation seeking advantage. It would provide incentives for every nation, and its goals would be achievable. The ideal implementation would have its administrators twiddling their thumbs because all nations found compliance both affordable and in their interest.
A universal tariff might be our only hope to reduce GHG emissions before disaster strikes, but the deeper problem is the skewed incentives of our consumer society that render our economy amoral, blind, and easily gamed. If we imagine the consumer society as an amoeba, changing its shape to feed off anything that smacks of profit potential, those incentives are its sensors. In other words, perverse incentives are intrinsic to the functioning of our consumer society. At a time when we need an economic system that recognizes and adapts to hazards, we have one whose sole impetus is to maximize profit.
As we’ve seen with the extraordinary speed in the development of a COVID vaccine, the incentives of a consumer society can be channeled toward solving problems. The tens of billions directed at the vaccine effort by government worked in part because developing a vaccine was not a threat to business as usual for any part of the supply chain, just an extension of what they were already doing. Averting a climate catastrophe remains a threat to an immense part of the economy, but that is changing rapidly as the move away from fossil fuels accelerates. The day might be approaching where the potential for profit from the shift might overwhelm the diminishing vested interests in the status quo.
That might provide some comfort if climate change was the only danger facing humanity. Instead, almost every ecosystem on the planet is nearing the brink of collapse as our consumer economy attempts to satisfy the rising expectations of billions of people. “Solving” the climate crisis—a very long shot in itself—does not let the current system off the hook. There are simply too many other crises hurtling toward us. The collapse of fisheries, competition for fresh water, the prospect of more pandemics as pathogens jump from plants and animals to humans, wholesale shifts in rainfall patterns as tropical rainforests are cut, the disappearance of pollinators, and so many other threats will continue to worsen regardless of whether climate stabilizes.
The consumer society is the problem. Our economic system is unsustainable, given the combined impact of human numbers, human aspirations, and the way we treat the biosphere. While this book has focused on the decisions and missed opportunities that brought us to our present predicament with regard to climate change, a look forward involves the broader question of whether we can reorient our economy toward a more sustainable footing. I’ll offer two likely paths for the future, one of which points to a way forward and the other a new Dark Age.
The consumer society can’t change or reform, but one of its instabilities provides a view of what might replace it. Part and parcel of the profit optimization of the modern economy has been the widening gap between rich and poor. This is a trend that has been accelerating since the 1980s, and it has been exacerbated by the loss of labor bargaining power resulting from corporate access to a global labor supply, and as automation has proceeded from routine industrial tasks to expert and managerial systems. We’re fast approaching a society where those with capital, the technologically adept, networkers, some essential workers, and a few leaders prosper, while the great mass of humanity finds itself with few prospects and no bargaining power.
If one aspect of the consumer society is that it is ecologically unsustainable, the winner-take-all nature of a consumer economy makes it politically unsustainable. For all its momentum, the consumer society is fragile. In a democracy, the few can hold on to their privileges only with the consent of the many. A significant portion of Trump’s 2016 support came from those who felt that the system was rigged against the working person (given what Trump did once in office, this ranks as one of the greatest examples of bait and switch in American political history). Evidence of this distrust was that in 2016 about 15 percent of Bernie Sanders supporters switched to Trump rather than to Hillary Clinton. As the profit-optimization imperative of a consumer economy slowly strangles the prospects of average Americans, this trend toward distrust of the elites will intensify.
The dark path is one already evident in Trump’s legions, who deny the reality of the 2020 election and proved willing to violently overthrow the will of the people and more than two hundred years of precedent, and to invade the very seat of democracy to preserve his power. It’s evident in the antidemocratic leaders who’ve come to power in democracies elsewhere such as Orban in Hungary, Erdogan in Turkey, and Bolsonaro in Brazil. Should these forces prevail in the United States, it’s difficult to imagine how the union would hold together, much less meet the multiple challenges looming over our future.
History has shown us how societies react to unstable times. Typically, people turn inward. Xenophobia rises. People take out insurance in the form of strengthened family ties and strengthened affiliations to neighborhood, cultural, and religious groups. There is less innovation and investment, as well as less social experimentation. It’s not all bad, but a society wracked by internal conflict is not one that might address external threats.
Then there’s the other path. Libertarians and small-government conservatives are not going to like it, but it is the natural response to the trends of income inequality we have seen for several decades. If the voters finally have had enough with a winner-take-all economy, they might choose candidates advocating for the democratic socialist model that characterizes most of the Scandinavian countries of Europe as well as Germany, France, Italy, and the United Kingdom (though my suspicion is that if the United States moves in that direction, somewhere along the way, the word “socialist” will disappear). All these nations have far stronger worker protections and far more robust safety nets. Germany, France, and numerous other European countries have varying degrees of worker representation on boards of directors. Most of the nations that rank higher than the United States in terms of quality of life as determined by the World Economic Forum have a democratic socialist political system.
A counterreaction to the unfettered capitalism that the United States has aspired to (but not practiced during crashes) would also likely result in a government that would be more willing to use the tax laws for social and environmental goals. Between the tax laws and regulations, government might be able to recognize and address long-term threats that we currently ignore. The democratic socialist approach is anathema to libertarians, who have been fighting tax laws for decades, but a world in which the depleted middle class uses its voting power for constructive reform would not be a world where libertarian ideas still prevailed.
Of course, a voter reaction against wealth inequality and the wage gap might not stop at a moderate solution such as democratic socialism. A movement to the extreme left could be as destabilizing as a movement to the extreme right. Keep in mind that the 2018 yellow vest movement in France, a populist uprising that drew from the financially stressed across the political spectrum, was originally prompted by a rise in fuel taxes that was in part intended to address climate change.
There is no guarantee that it will be something better that replaces the collapse of an unsustainable system, but there is a guarantee that an unsustainable system will collapse. It behooves us to think about what will replace it once it does. The threats facing society are of such scale that they will require well-functioning governments and the support of the people if they are to be addressed. The diamond magnate Harry Oppenheim once remarked, “If they don’t eat, we can’t sleep.” This is something the privileged might well keep in mind as our consumer society hurtles to meet its appointment with its own contradictions. A movement toward democratic socialism offers a plausible off-ramp. There may be others, but time is not our friend.