Self-Interest, Reality and Global Climate Policy

01/21/2014 09:04 am ET | Updated Mar 23, 2014

Over the years, the United Nations Intergovernmental Panel on Climate Change (IPCC) has helped build scientific consensus about the nature of the climate problem. Climate change remains a scientific fact, and no amount of ideology or propaganda can change that. Climate scientists continue to express their alarm at the slow rate of political change and the growing use of fossil fuels in emerging economic powerhouses such as China and India. According to New York Times reporter Justin Gillis:

Nations have so dragged their feet in battling climate change that the situation has grown critical and the risk of severe economic disruption is rising, according to a draft United Nations report. Another 15 years of failure to limit carbon emissions could make the problem virtually impossible to solve with current technologies, experts found...The report said that governments of the world were still spending far more money to subsidize fossil fuels than to accelerate the shift to cleaner energy, thus encouraging continued investment in projects like coal-burning power plants that pose a long-term climate risk. While the spread of technologies like solar power and wind farms might give the impression of progress, the report said, such developments are being overtaken by rising emissions from fossil fuels over the past decade, especially in fast-growing countries like China.

All of this is true, but somewhat beside the point. There are many forces driving the increased use of fossil fuels, and they will not be easily countered. The first is the rising demand for economic consumption in the developing world. This demand creates a political force that is impossible to resist. Moreover, leaders in these nations largely see their job as delivering economic growth as quickly as possible. They know that the stability of their regime and their own power depends on it. The second driver of fossil fuel use are those corporations that own the resource and have massive amounts of capital invested in the infrastructure to extract, transport and burn fossil fuels. These companies and their owners are longstanding experts at projecting their economic power into political influence.

This magnitude of economic and political self-interest will not be countered by a United Nations panel of experts. Some believe that since government cannot address the climate issue, the business community will somehow step into the vacuum. According to Mr. Gillis:

Business leaders will tackle many of the problems raised in the draft next week, at the World Economic Forum in Davos, Switzerland, where a day will be devoted to addressing the rising economic costs of climate change -- and the costs to businesses and governments of solving the problem.

Within the business community, "there is an awakening of increasing economic risk -- a recognition that operating conditions are changing and we need to respond," said Dominic Waughray, head of environmental initiatives for the forum. "There has been a failure of government to address these solutions. If there is an alliance of companies that can bite off pieces of the puzzle, it might help."

Corporations, like people, should be socially responsible and should take the long view, but many do not and instead focus on short-term gain to the exclusion of all else. Self-interest drives business just as it drives politics. The business case for a thriving planet is a good one, but not really better than the public policy case.

The motor for the scale of change we need can only come from one source: technological innovation. The IPCC is correct; with current technologies and the economic and political power structure governing the planet, the climate crisis cannot be solved. It is far easier to change technology than to alter the distribution of the world's political and economic power. The climate problem gets solved when renewable energy is so much cheaper and so much more convenient than fossil fuels that even the economic and political power of today's energy business cannot hold back the switch to new forms of energy. The problem only gets solved when current technology is replaced by new technology.

This is not a new story. People abandoned horses for cars. Young people have abandoned land lines for cell phones. Just as quickly, they are abandoning cable TVs for entertainment on the internet. The climate problem gets solved when someone builds a renewable source of energy generation and storage as easy to use as a refrigerator, and prices it so people can afford it. Nothing else will do it.

The role of government in all of this is to fund the basic and applied research that can generate the breakthrough innovations we need. The computer, Internet, GPS, and many more life-changing inventions began with research funded by the United States government. Some of this research was paid for by the Department of Defense, some by other agencies. Most of it was performed by scientists in America's great research universities (confession: like the one that I work for). The role of business is to commercialize these new technologies and get rich while doing it.

With apologies to the World Economic Forum's head of environmental initiatives, business leaders will not "tackle" the climate problem, nor will they "bite off pieces of the puzzle". It is useful that they discuss the issue, think about and take it seriously, but just as government officials act to maintain political power, business leaders act to generate profit, market share and return on equity. Neither government nor business is particularly good at solving crises that are caused everywhere and have most of their impacts in the future. Most business leaders will act if and when they see the possibility of making money-or to stay within the letter of the laws that govern their behavior. There is nothing wrong with that; our economic system requires that they play that role.

The degree of change required to address the climate problem and the interconnected environmental problems of global economic sustainability is massive. I am an academic, so I would never discount the importance of the thought leadership provided by the IPCC or events like Davos. However, if we look back to the last two centuries of rapid economic development, the most prominent motor of massive change has been technological innovation. Much of the innovation -- from the agricultural technology developed by America's land grant colleges to the development of the internet by the Department of Defense -- was funded by the government.

Governments, businesses, and universities act according to their perceived self-interest. Scientists and engineers in and around the world's research universities are working on the technical problems of energy generation, storage, distribution and efficiency. It is in the self-interest of scientists to develop solutions to these problems. For the most part, it is not in the short term interest of political officials or business leaders to generate the massive solutions needed to address the climate issue. There is some movement by these leaders to use energy more efficiently and to switch to cleaner fuel sources. However, as the IPCC report notes, those improvements are dwarfed by increased fossil fuel use in rapidly developing nations.

The desire for a global climate treaty or a carbon tax stems from noble sentiments, but since they are politically infeasible, I'm not sure they will do much to end global climate change. This drive for a global policy statement reminds me a little of the Kellogg-Briand Pact of 1928. That treaty, advocated by Columbia University President Nicholas Butler, required nations to renounce war as an instrument of national policy. It's gone real well so far, hasn't it? Nice policy, worthy goal, but meaningless public policy. While it is true that policy prescriptions that are not rooted in political reality might change that reality, I don't see that happening here.

Energy is central to modern economic well-being. Climate change requires that we change the energy sources we now rely on. Efforts to force that change by raising the price of fossil fuels have failed for the past 15 years. It's time to focus our attention on the alternative path: lowering the price of renewable energy and driving fossil fuels out of business.