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

● 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” http://climatedepot.com/

➲ 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

VCATVCAT

➲ Commons assets trust (CAT). Commons assets trust (CAT). Third sector in addition to Third sector in addition to private and public.private and public.

● Resources Resources ““created or inherited created or inherited togethertogether””

● ““common assets essential to lifecommon assets essential to life””● Why third sector? Why third sector?

➲ Legally binding mandate to use Legally binding mandate to use resources for the common good, resources for the common good, for this and future generationsfor this and future generations

➲ Requires window of opportunity, Requires window of opportunity, not enduring political willnot enduring political will

VCATVCAT

➲ Vermont currently considering CAT legislationVermont currently considering CAT legislation● Directly influenced by BarnesDirectly influenced by Barnes’’ Capitalism 3.0Capitalism 3.0● Senate: 2007Senate: 2007● House: 2011House: 2011

➲ VCAT :VCAT :““proposes to make it clear that state proposes to make it clear that state policy is to protect certain common assets policy is to protect certain common assets (such as air and water) for the benefit of (such as air and water) for the benefit of present and future generations, and to present and future generations, and to establish a framework pursuant to which establish a framework pursuant to which certain users of those common assets may be certain users of those common assets may be assessed fees that would be deposited into a assessed fees that would be deposited into a common assets trust fund, which would be common assets trust fund, which would be managed so as to protect those assets and managed so as to protect those assets and serve the interests of present and future serve the interests of present and future people of the statepeople of the state””

What?What?

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

How?How?

● Create common property rights to Create common property rights to unowned resources (e.g. waste unowned resources (e.g. waste absorption capacity) and publicly absorption capacity) and publicly owned resources (e.g. airwaves, owned resources (e.g. airwaves, water) water)

● Tax away rent (unearned income), e.g. Tax away rent (unearned income), e.g. land taxland tax

● Common provision of non-rival Common provision of non-rival resources (e.g. information, culture resources (e.g. information, culture and other public goods)and other public goods)

AllocationAllocation

➲ Access to rival resources (e.g. Access to rival resources (e.g. waste absorption capacity) must waste absorption capacity) must be rationed. Tragedy of open be rationed. Tragedy of open accessaccess

● ““doctrine of doctrine of res communesres communes provided provided that the king could not grant that the king could not grant exclusive rights of access to a exclusive rights of access to a common resourcecommon resource””

● Cap and rent (periodic auctions Cap and rent (periodic auctions with no resale)with no resale)

➲ Open access to non-rival Open access to non-rival resources (culture, information)resources (culture, information)

Revenue generationRevenue generation

➲ Annual permit revenue from 11% Annual permit revenue from 11% reduction in CO2 emissions: $720 reduction in CO2 emissions: $720 millionmillion

➲ Annual auction value of broadcast Annual auction value of broadcast airwaves: $375 millionairwaves: $375 million

➲ Annual increase in land values: Annual increase in land values: $330 million$330 million

➲ Fiscal deficit: ~$110 millionFiscal deficit: ~$110 million

Revenue expenditure: Revenue expenditure: Dividend or Dividend or

Investments in Common Investments in Common Good?Good?

➲ Example of CO2 permit auctionExample of CO2 permit auction➲ Dividend: Pros and Cons Dividend: Pros and Cons (Conventional Wisdom)(Conventional Wisdom)

● More politically feasibleMore politically feasible● Rebound effect (via imports) but Rebound effect (via imports) but

more equal distributionmore equal distribution➲ Investment: Pros and Cons Investment: Pros and Cons (Conventional Wisdom)(Conventional Wisdom)

● Greater CO2 reductionsGreater CO2 reductions● Regressive Regressive

Dividend would not Dividend would not redistribute wealth in redistribute wealth in

VermontVermont

Political Feasibility: Political Feasibility: Vermonter PollVermonter Poll

➲ 95.2% Vermont95.2% Vermont’’s atmosphere is a s atmosphere is a resource that belongs to all resource that belongs to all Vermonters equallyVermonters equally

➲ 78.1% believe the atmosphere is 78.1% believe the atmosphere is threatened by pollutionthreatened by pollution

➲ 82.5% believe individuals or 82.5% believe individuals or companies should be charged money companies should be charged money if they pollute the atmosphereif they pollute the atmosphere

Political FeasibilityPolitical Feasibility

Efficiency InvestmentsEfficiency Investments

➲ People are irrationalPeople are irrational➲ $0.03/KWhr for efficiency investments in $0.03/KWhr for efficiency investments in

Vermont, vs. $0.12/KWhr for electricityVermont, vs. $0.12/KWhr for electricity➲ Reinvesting the revenue into efficiency has 5-Reinvesting the revenue into efficiency has 5-

7 times greater impact on reducing carbon 7 times greater impact on reducing carbon emissions than the price signal alone (Cowart emissions than the price signal alone (Cowart 2008). 2008).

➲ RGGI results suggest that every dollar RGGI results suggest that every dollar invested in energy efficiency and renewable invested in energy efficiency and renewable energy yields $3-$4 in savings energy yields $3-$4 in savings

➲ Investments targeting low income groups could Investments targeting low income groups could improve sustainability and income distributionimprove sustainability and income distribution

ConclusionsConclusions

➲ Important to move policies Important to move policies into practiceinto practice

➲ One step at a timeOne step at a time➲ Must treat implementation as Must treat implementation as scientific experiments that scientific experiments that test our hypothesestest our hypotheses

➲ Institutions needed at scale Institutions needed at scale of problem. VCAT is only of problem. VCAT is only pilot projectpilot project