Category: Politics

The European Green Deal

From his perspective as Principal Advisor to the Directorate General for Climate Action in the European Commission (EC), Jacob Werksman is cautiously optimistic about the direction of international climate policy.  Werksman was my guest in the second webinar of our new series of Conversations on Climate Change and Energy Policy, held July 9th, sponsored by the Harvard Project on Climate Agreements (HPCA).  A recording plus transcript of the webinar is available here.

Stavins and Werksman during remote conversation, July 2020
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Jake Werksman’s role since 2012 as Principal Adviser to the Directorate General for Climate Action in the European Commission has focused on the international aspects of European climate policy.  His responsibilities include leading aspects of the European Union negotiations under the Paris Agreement and – more broadly – the United Nations Framework Convention on Climate Change.

Jake is an international lawyer, and holds a Bachelor’s degree from Columbia University, a J.D. degree from the University of Michigan, and an LL.M. degree from the University of London.  He has been involved in international climate change efforts for more than a decade since he began consulting for the Danish Government leading up to the 15th annual Conference of the Parties (COP-15) in Copenhagen in 2009. It was during that meeting, Werksman remarks, that two different models of international climate policy – the bottom-up ‘pledge and review’ approach versus the top-down legally binding agreement approach – first collided, all but derailing substantive action.

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Jacob Werksman

“Logistically there were huge problems,” he says. “A lot of people would certainly characterize it as not being the success at least that was hoped for.”  (But, I would note, it did lay the foundation for Cancun, and everything after that, which in a sense, led to Paris.)

The Paris Agreement, reached at COP-21 in 2015, obligates signatories to establish and achieve meaningful emissions reduction targets through the use of nationally determined contributions (NDCs), which, when aggregated, are intended to limit the increase of global temperatures to less than two degrees centigrade above pre-industrial levels.

While that goal is obviously jeopardized by the Trump Administration’s decision to withdraw from the Paris Agreement, Werksman is encouraged by the global response to that decision.

“The immediate impact of the Trump Administration’s withdrawal from Paris was that it helped to galvanize the international community around Paris. And you see that in the way in which no other party followed suit,” he says. “There may have been some that were on the edge of joining what they might have seen as a populist rejection of Paris and climate policy, but that didn’t happen.”

Much of our discussion focuses on the European Green Deal, the European Commission’s proposed ambitious roadmap to address climate change by increasing the production of renewable energy and increasing energy efficiency, more stringently regulating emissions from industrial and energy sources, and seeking to reduce emissions in the building and transportation sectors.

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Werksman representing the European Union in international climate talks

“There were a lot of bold proposals in the original European Green Deal,” Werksman says.  “As they relate to the international process, they also contain a proposal to move from our existing Paris Agreement targets of at least 40 percent reduction of emissions from 1990 levels by 2030, to a 50 to 55 percent emissions reduction target. And it contains a climate neutrality goal by 2050. So, the EU has committed to being a net zero economy, the first net zero region, by 2050. So, these are very ambitious pushes in the direction of low-carbon and a climate-resilient economy.” 

Werksman says that with the exception of the climate-neutrality goal, which has already been endorsed by EU leaders, all of the other action items in the European Green Deal will still require approval by the European Parliament and the European Council (where each member state has one vote).

A webinar viewer asks Werksman for his assessment of the $100 billion dollar climate pledge made by the richest countries in 2009, prior to the Paris Agreement. Werksman responds that the Organization for Economic Cooperation and Development (OECD), which tracks the fund raising efforts, estimates that $70 billion had been raised by 2018, while also stating that more needs to be done to better leverage private finance.

“There are significant public resources available, but we need to get better at using those through leverage and guarantees, participating with private sector banks in the shaping of softer loans in order to get the money flowing to a larger scale,” he remarks.

I wrap up the webinar by asking Jake his opinion of the youth climate movements that swept through the United States and Europe last year, and Werksman responds that he finds them both “inspiring and sobering.”

“They had two messages. One was, we agree with everything that people like me have been saying about the need to act and to act urgently. And why haven’t you succeeded? Why haven’t you done better if we can talk in incremental terms about the kind of progress that we’ve been able to make moving from the Framework Convention to the Paris Agreement? But you try to explain to a young activist who doesn’t see change on the ground how that is success after 30 years of effort and you quickly run out of words,” he says.

“I very much hope that when they’re allowed back on the streets and back into the classrooms that they won’t have forgotten this, and in particular when they’re allowed into the voting booths, they won’t have forgotten this and they will help make up for some of the shortfalls of the efforts that our generation has been making.”

As I noted at the outset, a recording of the webinar with Jake Werksman, including a complete transcript, is available here.  I hope you will check it out.

The previous webinar in this series – Conversations on Climate Change and Energy Policy – featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets.  And the next one is scheduled for 9:00 am (Eastern Time USA), August 19th, when my guest will be Rachel Kyte, Dean of the Fletcher School of Law and Diplomacy at Tufts University and long-time participant in international climate change policy research and action.  Click here to register in advance for that webinar.

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Global Climate Change Negotiations: Learning from the Past to Think Carefully about the Future

I’m pleased to say we have released the newest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  In this latest episode, I engage in a conversation with Sue Biniaz, long-time legal expert and lead negotiator for the U.S. Department of State in the international negotiations under the United Nations Framework Convention on Climate Change (UNFCCC).

Sue is currently a Lecturer in Law at Yale Law School in New Haven, Connecticut. Before that, she served for over thirty years in the State Department’s Legal Adviser’s Office, where she was a Deputy Legal Adviser, as well as the lead climate lawyer and a lead climate negotiator from 1989 until early 2017.  She is also a Senior Fellow at the United Nations Foundation, and has taught at Columbia Law School and the University of Chicago Law School.  She attended Yale College and Columbia Law School, and subsequently clerked for Judge Dorothy W. Nelson on the 9th Circuit Court of Appeals.

Sue Biniaz speaking at Harvard Kennedy School, April 2018

In this podcast episode, we talk about Sue’s extensive experience in the climate negotiations.  Commenting on COP-25 in Madrid last December, after Sue had left the State Department, she takes note of the disappointment that surrounded the failure to reach agreement on the “Rulebook” (detailed guidance) for the one article (of twenty-nine) in the Paris Agreement which had not already been resolved:  Article 6, which deals with modes of international cooperation, and provides the potential home for linkage of policies in different countries, including so-called carbon markets:

“It was unfortunate that they didn’t reach agreement on Article 6.  I think the compromises were all pretty evident and they ran out of time. I think there wasn’t enough kind of political oomph put into it at the end. That’s an example of if the U.S. had been there at a political level, they would have been able to sort of bang some heads together and get it done.”

With COP-26 having been postponed from November 2020 to sometime in 2021, due to the COVID-19 pandemic, Biniaz believes that international climate negotiators may now wish to take advantage of this hiatus to consider ways to improve the annual climate talks.

“One of the reasons I think the COP needs to be re-thought is because I think the metric that’s been used by many people including the press has been the negotiating issues that are on the table,” Biniaz argues. “If you only look at those, it just puts too much pressure on what should be kind of a minor aspect of a COP compared to everything else that’s going on.”

With the U.S. elections looming in November, Biniaz says hopes are high that a new presidential administration will rejoin the Paris Agreement, and reengage in a productive way.

“If you’re going to rejoin the Paris Agreement, do it in a way that isn’t going to just be reversed four or eight years later. Try to make sure you have enough domestic buy-in so it’s harder for a future administration to just reverse it again,” she states. “And…if you’re going to come back into the agreement, try to use whatever leverage the United States has at that point to get other countries to do more.”

As you will quickly realize when you listen to this podcast episode, Sue Biniaz is not only very smart and exceptionally knowledgeable; she is also unusually clear and articulate.  You will not regret listening!

Sue Biniaz (center) with Todd Stern, then the U.S. lead climate negotiator, at COP-17 in Durban, South Africa, in 2011.

All of this and much more is found in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Listen to this latest discussion here, where, by the way, you can also find a complete transcript of our conversation.

My conversation with Sue Biniaz is the tenth episode in the Environmental Insights series.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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What Can Economics Really Have to Say About COVID-19 Policies?

Recently, economists and other policy analysts have called for the use of benefit-cost analysis to assess existing and proposed public policies to address the novel coronavirus pandemic, the incidence of COVID-19, and the deaths that may follow.  These calls for a benefit-cost perspective have unfortunately generated both confusion and controversy; and – most important – are unlikely to be persuasive to key decision makers.  But ignoring economics when considering alternative policy responses to the pandemic would be a mistake.

Fortunately, a different type of economic analysis is available, which is much more likely to be acceptable to policy makers, and would enable government authorities to identify policy instruments that minimize costs to achieve given objectives.  I’m referring to cost-effectiveness analysis, which differs in important ways from the benefit-cost analysis now being recommended by my fellow economists, as well as others.

First, I should note that in principle, sensible arguments can and have been made in favor of the use of benefit-cost analysis.  I endorse the use of such analysis to assess the wisdom (efficiency) of a wide range of government policies (through what is known as Regulatory Impact Analysis in the U.S. government), and I have been teaching these methods, under the rubric of “net present value analysis,” in my environmental economics course at Harvard for some 30 years.  This type of analysis facilitates the identification of efficient policies that generate the greatest net benefits, that is, benefits minus costs.

So, to be perfectly clear, I enthusiastically endorse the work being carried out by economists and others to execute such benefit-cost analyses of COVID-19 policies.  My concern, however, is that in the current context, policy makers are likely to be highly resistant to embracing this type of analysis for assessing existing and potential pandemic responses.  Rather than throwing out the (economic analysis) baby with the (benefit-cost) bath water, I am suggesting that other forms of economic analysis — namely cost-effectiveness analysis — can be useful, and the results of such analysis should be seriously considered by policy makers.

The problem is that executing benefit-cost analysis requires evaluating not only the costs, but also the benefits of policies in economic terms.  In the COVID-19 context, that is difficult enough on the cost side because of the great uncertainties involved, but at least those costs – largely the loss of GDP due to slowdown in economic activity – are fundamentally financial.

The benefit side – primarily the reduced risk of mortality – requires estimates of the value of a statistical life (VSL), which typically draw upon empirical evidence from markets in which people receive higher wages for taking on more risky jobs (in sectors such as mining, forestry, and commercial fishing).  The concept and use of VSL – estimated by the U.S. Environmental Protection Agency to be about $10 million per life saved – is well accepted by economists, but is highly controversial among nearly everyone else.

For these reasons, politicians are reluctant, to say the least, to adopt the benefit-cost paradigm to help them formulate better policies to address the current pandemic.  But much of the confusion and nearly all of the controversy could be avoided by employing cost-effectiveness analysis, in which economics is brought to bear only on the cost-side of an issue.

I need not tell readers of this blog that this is an approach that is frequently employed in the environmental realm to examine alternative policies that would bring about a given degree of environmental benefits, that is, a given reduction in environmental damages.  For example, in the case of carbon dioxide (CO2) emissions, a variety of analyses have found that cost-effective approaches would cost just 25% of what the costs would be with some other approaches.

In the current, COVID-19 context, take some policy objective as given (presumably not a reckless one such as reopening “large sections of the country” by Easter Sunday with “packed churches,” as President Trump had recently promised).  Rather, a policy objective to be used in such analysis might be a specified maximum mortality number, a specified mortality risk reduction, or – more simply – a specified case transmission rate.  Then, the economic costs of achieving that objective by using various alternative policy instruments can be estimated and compared.  At a minimum, these policy instruments would include – among others – the current approach of social distancing of nearly the entire population to suppress the curve of new incidence; and a targeted approach to reduce transmission – more testing, more contact tracing, and more and better facilities for those who need to be separated from others or treated.

For example, one recent study estimated that the current practice of widespread social distancing may be expected to save some 1.2 million lives at an economic cost of $6.8 trillion.  Without resorting to trying to value human lives, the question is “simply” how much would it cost with an alternative, more targeted policy to save a similar number of lives?

By the way, the uncertainty that plagues various aspects of these and other policy approaches can be taken into account in the cost-effectiveness calculations.  Likewise, constraints – whether physical (such as limited availability of ventilators or cotton swabs), economic, institutional, or political – can all be included in the analysis.  In my work as an environmental economist (focused on climate change policies), we do this regularly.  My professional cousins – health economists, principally in schools of public health – are equally or more familiar with these approaches, and are well equipped to make the cost comparisons.

In this way, without the confusion and controversy that arises with trying to quantify the economic benefits of mortality risk reduction, economic analysis can still play an exceptionally important role by identifying policies through cost-effectiveness analysis that can help achieve sensible objectives with as little sacrifice as possible of the many other things we value.

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