Category: Economics

Matters of money

China emitting over 14 gigatonnes of CO2 equivalent

In a development that illustrates the global dynamics of climate change China’s emissions now exceed those of the entire developed world put together.

Since at least the 1990s the basic nature of a global deal to control climate change has been clear. States like Canada with the highest historical and per capita emissions need to cut their fossil fuel use dramatically. At the same time, rapidly developing countries need to choose a lower carbon development path than the states that preceded them.

Canada is massively reneging on this deal. We have never hit our climate targets and our leaders continue to act as though continued fossil fuel development can somehow be compatible with climatic stability. We also treat the emissions from the fossil fuels we produce as someone else’s problem, just as we treat the emissions that go into our imports (some of those Chinese emissions are making stuff for the benefit of Canadians, and people in all rich countries).

Persisting with the status quo is a suicide pact, yet states and citizens have not yet displayed the wisdom of recognizing and acting upon that. With so little time left to change course and avert the worst impacts of climate change we cannot keep accepting governments that abstractly promise that emissions will fall in the far future while working in practice largely to protect business as usual.

U of T grad school statistics

Someone recently posted a link to the Graduate Association of Students in Political Science (GASPS) email list to the University of Toronto’s School of Graduate Studied Data Dashboards.

There is data on admissions, enrolment, funding, degree completion, and career outcomes.

The data on people doing the PhD in Political Science specifically is quite interesting:

Elements that jump out at me: it seems like about 25-30% of people admitted never complete the program, the median time to a degree is 7.33 years, and most people finish in 5-8 years.

The chart on average gross income for domestic students in the polisci PhD program is also interesting:

The dark blue is the funding package which gets halved in year 6 and eliminated thereafter. The medium blue shows external awards, which are substantial for people in years 2-5. You really can really see the limited degree of income for people in years seven and beyond, almost all of which comes from teaching and research assistant work (the light blue), which while financially necessary for most probably hurts the completion rate for people who reach those years.

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Would Scottish independence mean an end to the UK deploying nuclear weapons?

Britain’s Armageddon weapon are their four Vanguard-class ballistic missile submarines: Vanguard, Victorious, Vigilant, and Vengeance. Since decomissioning their aircraft-dropped bombs in 1998, the subs have been the only means of delivery for British nuclear weapons, with each possessing 16 ballistic missile tubes for Trident D5 missiles, each built to carry as many as 14 of some warhead types.

Oddly, and despite the obligation under the Nuclear Non-Proliferation Treaty for existing weapon states to work toward disarmament, Prime Minister Boris Johnson announced in March that as part of his government’s ‘Global Britain’ agenda they will raise the cap on the number of warheads deployed on submarines from 180 to 260.

All of the British subs are headquartered at Her Majesty’s Naval Base, Clyde at Faslane in Scotland. Today, The Guardian is reporting that if Scotland chooses to secede from the UK it would raise difficult questions about what to do with the subs, in part because building an equivalent facility in England or Wales would be very costly and would provoke intense opposition.

Even if done out of constraint rather than principal, it would be encouraging to see a nuclear weapon state stop deploying its weapons. As Richard Rhodes summarized in his fourth volume on nuclear weapons:

It followed, and follows, that there is no military solution to safety in the nuclear age: There are only political solutions… The impossibility of resolving militarily the new situation that knowledge of how to release nuclear energy imposes on the world is the reason the efforts on both sides look so desperate and irrational: They are built on what philosophers call a category mistake, an assumption that nuclear explosives are military weapons in any meaningful sense of the term, and that a sufficient quantity of such weapons can make us secure. They are not, and they cannot.

Threatening to use or using nuclear weapons in warfare has always been highly questionable under international law. However they are used they would have downwind consequences which would not distinguish between combatants and civilians, and it will always be questionable whether the use of such weapons is proportional to any provocation or whether it would serve a purpose of military necessity. A mass nuclear exchange literally threatens the existence of humanity, since smoke from burning cities would rise high into the stratosphere and cause drastic global cooling with appalling agricultural and humanitarian consequences.

Keeping such weapons for the sake of national prestige, and thus running all the associated risks of miscalculation or accidental or unauthorized use, is neither prudent nor justifiable in a world where a nuclear arms race is already apace.

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The rational mind as storyteller not decider

There is an intriguing hypothesis about the rational mind: while we think of it as a weigher of evidence that contributes to the decisions we make when faced with a choice, it’s possible that its real role is to construct a story after the fact about why we made the choice we did for instinctive or emotional reasons.

Chris Voss alludes to this in his book about negotiations:

In Descartes’ Error: Emotion, Reason, and the Human Brain, neuroscientist Antonio Damasio explained a groundbreaking discovery he made. Studying people who had damage in the part of the brain where emotions are generated, he found that they all had something peculiar in common: They couldn’t make decisions. They could describe what they should do in logical terms, but they found it impossible to make even the simplest choice.

In other words, while we may use logic to reason ourselves toward a decision, the actual decision making is governed by emotion.

Voss, Chris. Never Split the Difference: Negotiating As If Your Life Depended On It. Penguin Random House, 2016. p. 122 (emphasis in original)

It has occurred to me that while the fundamental units of the physical universe may be the particles of the standard model or superstrings or something similar, the fundamental units of the psychological universe may be stories. We make decisions — perhaps — by analogy and imagination, using the stories we know as templates for projecting what could happen from one or another course of behaviour. This is compatible with the idea that generals are always fighting the last war, or that decision makers find an analogy as a schema for assessing the options before them in the present case (famously, the notion that states blundered into the first world war arguably motivated the appeasement policy toward Hitler which was later judged to have contributed to the second, while the lesson learned about the dangers of appeasement fed the undue combativeness of the cold war).

The idea that rationalization is after-the-fact storytelling risks feeding in to a nihilistic perspective that our decisions are just uncontrollable emergent phenomenon, coming out of a black box which we cannot control or influence, but that does not follow if we accept that we can influence the conditions that influence our emotions and train ourselves in how we respond emotionally. Voss’ book elaborates on this view with numerous practical details and examples, not taking for granted that people are emotional so they just do as they do, but highlighting how often-subtle mechanisms for influencing how people feel can powerfully influence how things turn out.

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Open thread: global tax coordination

U.S. Treasury Secretary Janet Yellen has raised the idea of a coordinated global minimum corporate tax, with the aim of disrupting ‘race to the bottom’ dynamics in taxation and the shift of assets to tax havens.

Global coordination is likely a necessary prerequisite to effective wealth taxation.

It could also help to improve the tolerability and effectiveness of carbon taxes, as domestic producers would be less able to use inaction elsewhere as a way to resist decarbonization policy proposals.

UBC’s financial analysis of divestment

During the U of T campaign, a validating source like this memo from the University of British Columbia’s Vice-President Finance and Operations would have been amazing for responding to the argument that divestment is financially irresponsible:

Results of Mantle’s analysis (full report attached as Appendix A) indicate that the link between climate change and the financial viability of investment assets is clear. Carbon intensive companies will be exposed to climate related financial risk as the world commits to reduce carbon emissions through regulatory, legal, market or technology shifts away from fossil fuels. Rapidly evolving trends – such as greater corporate disclosure of climate risk, commitment to a “Paris Aligned” future, the acceptance of a “carbon budget” – are greatly increasing the risk in holding shares of companies whose value is derived from the continued growth and expansion of global fossil fuel use.

Seeing the arguments about the carbon bubble from Bill McKibben’s movement-instigating article and our own divestment brief affirmed by university executives and their consultants demonstrates the degree to which the argument against continued investment in fossil fuels is sound, as well as how it has diffused beyond activists into the thinking of decision makers.

Tonight’s thesis reading will be more than unusually encouraging, between this and today’s Supreme Court of Canada ruling on the carbon tax.

Canada and Toronto’s housing markets

Perhaps the hardest thing about doing a PhD in Toronto is finding decent housing and paying for it with the kind of income the university’s funding package and TA work provides. Since the 2008 financial crisis, governments around the world have undertaken exceptional monetary and fiscal stimulus to try to sustain employment and economic growth. Those ultra-low interest rates, however, have affected asset prices in at least two ways. First, since they cannot even earn the rate of inflation from savings accounts, people have been prompted to invest in all manner of speculative assets, from frothy tech stocks to bitcoin to the housing bubbles inflating around the world. At the same time, low interest rates have facilitated massive borrowing for house purchases, also helping to drive up the level of house prices.

Those dynamics have several unwanted current and future impacts. For one thing, I worry that the sense of affluence it fosters among house owners is contributing to an erosion of empathy. It is also worsening the intergenerational inequalities between people who bought houses decades ago and have experienced a huge jump in wealth as a result and the younger people who in past generations would have been entering the housing market now. When interest rates do finally need to rise (once inflation rises above target levels) many home owners risk being in the unfortunate position that the 2008 crisis caused for so many: being ‘underwater’ with a mortgage now larger than the market price of their home.

I think it would be prudent for governments to pay more attention to asset price levels alongside the inflation and employment rates when setting policy. Their efforts to juice their way out of the last crisis seem to be setting up the next one. It would also be desirable for countries to start requiring comprehensive disclosure of wealth as a prelude to wealth taxation.

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Cultivating a conservative climate movement

Let’s begin with two simple premises:

  1. The amount of climate change the world experiences depends on the total quantity of fossil fuels that get burned. As such, there is little value in avoiding burning particular coal, oil, and gas reserves in one time period if we then burn them in another
  2. In Canada, the US, and the UK the electoral pattern for a century or more has been alternating between relatively left-wing and relatively right-wing governments

I think it follows from this that for climate change mitigation policy to succeed, it cannot only be supported by progressives or supporters of left-of-centre parties.

It’s true that the most prehistoric form of climate change denial (saying there is no problem, or it’s a problem too small to require action) is concentrated among political conservatives. It’s also true that the fossil fuel industry has outsize influence over conservative politics, parties, and politicians. To me — however — these observations are akin to the argument that since 85% of the world’s energy currently comes from fossil fuels it is imposible or unrealistic to try to replace them. In both cases, the depth of the current dependency demonstrates the need for change, rather than its impossibility.

Recently, UK Conservative MP Alicia Kearns and U.S. Republican congressperson John Curtis co-authored an article in the Times of London: The left should not dominate the conversation on climate change.

They also appeared in a recent panel hosted by the Hudson Institute:

Progressives tend to be very opposed to the argument or idea that conservatives need to be won over to climate change mitigation through fossil fuel abolition. The intersectional climate justice analysis holds that climate change is a symptom of systemic injustice and cannot be corrected through narrow solutions which do not eliminate colonialism or capitalism or patriarchy. It is a joined-together worldview that clearly motivates a lot of people, but I don’t think it’s a sound strategy for avoiding catastrophic climate change. Furthermore, I challenge the claim that only systematic change in our political or economic system can solve the problem. Progressives also tend to assert that renewable energy is cheaper and better in every way than fossil fuel, implicitly acknowledging that it could be possible to replace where our energy comes from without fundamentally changing much more about society.

I can see at least a couple of routes for moving forward with cultivating a conservative commitment to climate change mitigation.

Thinking about the span of the next couple of decades, I think conservatism in the English-speaking democracies may be posed for a huge splitting apart between comparative pragmatists who are willing to accept what science has unambiguously shown and pure ideologues whose policy preferences do not relate to what is really happening in the world. If that split can be enlarged to the point of crisis — when those on the empiricist side will no longer tolerate supporting the same candidates and parties as those on the fantasist side — those willing to consider evidence will likely have a long-term electoral advantage as those most implacably opposed to climate action die off, young people with a better understanding of climate change become politically dominant, and as the undeniable effects of climate change become even plainer.

Another plausible route to cultivating conservative support for climate change mitigation is through faith communities. The Catholic Church, United Church, Anglican Church, and others have been outspoken from the centre of their institutions about the need to control climate change. It’s true that there are some whose theology sees the Earth exclusively as a set of resources to be exploited, or who believe that a religious apocalypse will soon bring an end to the material world making long-term problems irrelevant, but I suspect there are many more in all faiths and denominations who can be won over to the view that we have a duty to care for creation and not to pass on a degraded world to our successors.

I think part of the progressive wariness about outreach to conservatives arises from how the intersectional view ties climate change into the social justice and economic redistribution agendas which animated the left long before climate change became a mainstream concern. Cooperating with conservatives on the narrow issue of replacing fossil fuels would not advance the general project of abolishing capitalism or re-ordering the global system. Some see climate change as a crisis which would be ‘wasted’ if our response only sustains planetary stability. Others convincingly point out that even without climate change as a problem the idea that resource use and waste production can increase indefinitely is fundamentally at odds with a finite planet. All that said, climate change seems to be the most pressing and serious societal problem facing humanity, and resolving it would give us more time and a more stable global environment in which to pursue other aims of justice.

I don’t believe either progressives or conservatives can or should win one another over to their entire worldview. The progressive climate change movement is an enormous success and source of hope, and I am not calling for it to be dismantled or fundamentally altered, though they ought to give more consideration to cross-ideological alliances on certain vital issues. As long as effective climate change policies are something which one side assembles and the other dismantles we cannot succeed, and so winning over conservatives to climate action is an indispensable condition of success.

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Canada and a just transition off fossil fuels

At a town hall tonight on a just transition away from fossil fuels — organized by 350.org and attended by Green Party parliamentary leader Elizabeth May and NDP climate change critic Laurel Collins, but which environment minister Jonathan Wilkinson declined to attend — May repeatedly brought up the Task Force on Just Transition for Canadian Coal Power Workers and Communities as a model. In particular, she emphasized the importance of countering the narrative that escaping our fossil fuel dependence will be bad for jobs, and of respectfully consulting with the most affected communities when making policy.

The central nonsense of Justin Trudeau’s climate change policy is his unwillingness to accept that only fossil fuel abolition will let us avoid catastrophic climate change. Canada has already more than used up our fair share of the global carbon budget, and building new long-lived fossil fuel infrastructure will only increase the costs of our transition when we need to scrap them early and scramble even faster to build climate-safe replacements. Canada’s assertion that we can keep expanding bitumen sands and LNG production and exports is also entirely at odds with what fairness and pragmatism demand globally. The richest and dirtiest states need to lead the way, not keep making excuses, or the global logjam against sufficient action will be impossible to overcome.

Nuclear energy policy

This week’s Economist has a pretty solid middle-of-the-road editorial position on nuclear energy in a world with a climate crisis:

Solar and wind power are now much cheaper, but they are intermittent. Providing a reliable grid is a lot easier if some of its generating capacity can be assumed to be available all the time. Nuclear provides such capacity with no ongoing emissions, and it is doing so safely and at scale around the world.

Despite this, safe and productive nuclear plants are being closed across the rich world. Those closures and the retirement of older sites mean that advanced economies could lose two-thirds of their nuclear capacity by 2040, according to the International Energy Agency. If new fossil-fuel infrastructure fills the gap, it will last for decades. If renewables do so, the opportunity cost will be measured in gigatonnes of carbon. Renewables replacing nuclear capacity would almost always be better deployed to replace fossil-fuel capacity.

Sometimes the closure of nuclear plants is largely a matter of economics. In places where emitting carbon dioxide comes with no price, such as America, the benefits of being emissions-free are hidden from the market. That hurts nuclear, and it should be rectified. When closure is political, the onus is on Green politicians, in particular, to change their tune. To hasten the decline of nuclear power is wilfully to hobble the world in the greatest environmental struggle of all.

Related topics:

Papers on nuclear energy:

Canada’s nuclear industry:

Nuclear waste

Nuclear economics

Nuclear energy and climate change

New reactor types and designs

Nuclear energy and weapon proliferation

Accidents and safety