Please note that this is BBC copyright and may not be reproduced or copied for any other purpose. RADIO 4 RADIO CURRENT AFFAIRS ANALYSIS THE TIGER OR THE TANK? TRANSCRIPT OF A RECORDED DOCUMENTARY Presenter: Dieter Helm Producer: Simon Coates Editor: Nicola Meyrick BBC White City 201 Wood Lane London W12 7TS (020) 8752 7279 Broadcast date: 24.03.2005. Repeat date: 27.03.2005. CD Number: PLN511/05VT1012 Duration: 27’33” Taking part (in order of appearance): Professor Sir David King, Kt., F.R.S., F.R.S.C., Chief Scientific Adviser to H.M. Government, Head of Office of Science & Technology & 1920 Professor of Physical Chemistry, University of Cambridge Cameron Hepburn Elizabeth Wordsworth Junior Research Fellow in Economics, St. Hugh’s College, Oxford The Baroness Young of Old Scone Chief Executive, Environment Agency for England & Wales Scott Barrett Professor of Environmental Economics & International Political Economy, & Director of the Energy, Environment, Science & Technology Program Paul H. Nitze School of Advanced International Studies, Johns Hopkins University Dr. Bernie Bulkin Former Chief Scientist, BP plc Fellow, New Hall, Cambridge & Chairman, Energy & Transport Committee, Sustainable Development Commission Dr. Mayer Hillman Senior Fellow Emeritus, Policy Studies Institute & co-author, How We Can Save the Planet David Pearce, O.B.E. Professor of Environmental Economics, University College London Martin Weale, C.B.E. Director, National Institute of Economic & Social Research HELM: Climate change, we’re told, is the great challenge of our age. The Government’s Chief Scientific Adviser argues it’s even more serious than terrorism. KING: We will shortly be reaching a level of carbon dioxide beyond which we will be out of control in terms of massive climate change events. Some rapid progress is required; Kyoto itself is only a process which is just beginning. HEPBURN: If you look at indicators of economic growth— once you correct for natural resource depletion—you find that, in some parts of the world, positive economic growth rates are actually masking falls in genuine wealth. YOUNG: For me, the whole issue of the impact on the environment and environmental improvement is so important that we’ve got to use every tool there is, and if we don’t use the economic ones we’re tying one hand behind our back. BARRETT: Unless countries are willing to pay the price, nothing is going to happen, and there’s no system that you could conceive of that’ll get around that. And the costs are going to be substantial, particularly if you want to do something serious about this issue. HELM: There are four points here. The situation is very serious; economic growth may not be quite as good as it seems; we’ve got to use economic tools to address the problems of environmental damage; and it’s going to be very expensive. In this programme, I’ll be examining these critical issues, how they fit together and what our role should be in protecting the planet for future generations. Politicians are increasingly claiming that they understand the importance of confronting climate change. But they can’t quite convince themselves that doing so might actually mean more than pursuing conventional economic growth. But first we need to understand the scale—and dimensions—of the problem. Just how serious is it? Barbara Young is Chief Executive of the Environment Agency. YOUNG: We’re still seeing an increase in pollution from transport; we’re still seeing childhood asthma. One in five children with childhood asthma—that’s a dreadful statistic! We’re seeing, certainly within the next ten, fifteen years, real worries about supply of water in the South East, real worries about increasing flood risk. We’ve lost seventy per cent of our farmland birds over the last thirty years. If you take the biodiversity issue on a global scale where we’re really— with both climate change and pressure on habitats—likely to see substantial extinctions happening at a rate ten times faster than has been recorded previously—that doesn’t sound like something that can be sustained for the future. HELM: So what you’re saying is that the sort of economic growth we’ve got now is just not sustainable? YOUNG: I don’t believe it is, no. HELM: So the sort of growth we have is incompatible with protecting the environment. It means that nature’s in retreat as the climate changes. We may be able to get the numbers back for some species. But the question for Sir David King, the Government’s Chief Scientific Adviser, is: what will happen if we don’t act decisively to arrest climate change? KING: For me the greatest problem is going to be the big impacts on a number of countries, such as Bangladesh, India, Japan, where we might find that massive migration of populations becomes an issue for all societies. So, I do see a potential for economic and political destabilisation on a large scale. HELM: Catastrophic social and political consequences affecting major economies like Japan; and vast population movements in the Indian subcontinent—these would be unprecedented in modern times. They force us to come up with solutions, and solutions that work globally. We already have, of course, the Kyoto Protocol on Climate Change. But it took years to come into force. And although it limits emissions—and allows them to be traded—the countries that really matter—the United States, China and India—the big coal burners—are all outside its scope. Scott Barrett, at the Johns Hopkins University School of Advanced Intenational Studies in Washington, has analysed global environmental agreements, what works and what doesn’t work. What’s the real problem with Kyoto? BARRETT: Climate change mitigation is going to involve much greater costs. And as soon as you raise the costs, you also alter the incentives and it becomes that much more difficult to get countries to cooperate. And the real problem with the Kyoto Protocol as an answer to all of this is that it doesn’t really change incentives. HELM: Why aren’t incentives changed by Kyoto? Surely you just go round and you tell countries, “This is the limit of emissions you’re going to have.” And then can’t they use things like emissions trading and so on just to get that as cheaply as possible? BARRETT: Well, the logic of Kyoto is very much, I would call, a top-down logic. The agreement that was negotiated in 1997, which was so precise about the emission limits that individual countries have to meet, that same agreement was very vague about how compliance would be handled—except to say that any penalty for non- compliance that would apply with binding consequences would have to be agreed by an amendment. Well, an amendment is basically a separate treaty. So that means for all intents and purposes the emission obligations under the Kyoto Protocol are political. HELM: Political and therefore top-down—the lowest emissions limits that enough countries will accept. But to slow down environmental damage and to stop it involves persuading you and me— and businesses—to think and behave differently. That’s bottom-up. Bernie Bulkin was formerly Chief Scientist at BP. He now chairs the key energy and transport committee of the Sustainable Development Commission that advises ministers. Can we really expect industry— which has caused this problem—to solve it? BULKIN: The climate problem, because it requires global cooperation and is a very complex problem—it involves everything we do, really, in society—is of a different order of magnitude to anything we’ve faced before. To me, that does not mean that technology is any less important or any less capable of addressing the problem. It’s just a different kind of technology and a different order of magnitude in terms of who has to adopt the technology in order to solve the problem. HELM: And do you think the problem can actually be solved? BULKIN: Yes, but there is no one thing that can solve the problem. HELM: We needn’t be defeatist about our ability to make technology work on this problem. After all, it—and human ingenuity— are really what drive economic growth. So, in principle, technology- driven economic growth can go hand-in-hand with the environment. But in practice let’s remember the sheer scale of the challenges that confront us. Do we really have time to wait for these solutions to come along? HILLMAN: I think we’re already past the point of no return and that is a sad fact. HELM: Doyen of environmental campaigners, Mayer Hillman, author of How We Can Save the Planet. HILLMAN: If you simply consider the iconic image of the Antarctic ice shelf collapsing into the southern Atlantic and realise that, if mankind stopped burning any fossil fuels for the next few hundred years, that Antarctic ice shelf would not reinstate itself, you will then be aware of this process already being underway—the runaway effect— and all we can do now is to prevent it becoming even more serious than it will be anyway. We’ve left it too late simply because we have placed our faith—and when I say “we”, I mean all economies in every country round the world—in the belief that the pursuit of happiness lies through the medium of economic growth. HELM: But for most of us that faith is unshakeable. We’ve no doubt that our happiness comes with conventional economic growth. And that’s true of China and India too, the new tigers. So although Mayer Hillman is right about the urgency, his conclusion seems unrealistic. Bernie Bulkin also has a point about the potential for technologies to fix the problem, but that will take time—when future generations will be struggling to live with what will almost certainly be a much hotter planet. So how do we reconcile the two—and, in particular, can the conventional way we think about borrowing and investments be applied to something on the scale of climate change? We need a time lord to help bridge the gap between us and the future. Cameron Hepburn is an environmental economist at St. Hugh’s College, Oxford. HEPBURN: The conventional way that we trade off between the present and the future—so every time you make an investment, whether it’s in your house or a savings account, you’re trading off between the present and the future—that sort of logic can be applied to think about the environment, indeed to think about any investment on a thirty year, forty year perhaps time-frame. But once you start thinking generations ahead, hundreds of years ahead, conventional economic frameworks begin to become a little bit unreliable, and we need to remodel them. HELM: And is the reason why we think of the future as less valuable than the present, in a sense, because we just assume that we’re going to go on growing at three per cent per annum and, therefore, we’re going to be so much better off in the future that we really don’t have to worry about it too much now? HEPBURN: Indeed. One of the assumptions underlying conventional assessment of costs and benefits is that the economy will continue to grow at three-and-a-half per cent, four per cent per annum. And that assumption’s fine for the short-term because that’s been our experience over the last two hundred years. But we really have no grounds to say with certainty that that kind of optimistic growth scenario is going to continue, particularly over a scale of several hundred years. HELM: Further into the future we can’t go on assuming that we’ll just go on getting richer and richer. Technology might save us, and it’ll certainly get us some way down the path. But we need to do something in the short-term, too—the next thirty or forty years. Although, as we do, there’s one more alarming fact we have to take into account. By mid-century there’ll be many more of us to support. PEARCE: I would place a lot more weight on what you do with fifty per cent more people than on what you do about economic growth. HELM: Professor David Pearce of University College London is Britain’s foremost environmental economist. PEARCE: The reason for that is when we look at population change, it’s highly correlated with loss of natural environments and natural land, and I can’t see that process changing unless we have some very dramatic increases in the amount of food that we get from a hectare of land. But just accommodating that extra three billion really, I think, imposes the largest problem of all for anyone who’s interested in the idea that somehow we’re talking about a sustainable level of economic growth. We can increase our wealth, but if you’re increasing population at the same time then wealth per head of the population can go down very easily. And all the economic environmental models tell us exactly that. They tell us that this is a grave, grave risk. HELM: Those three billion extra people will largely be concentrated in the developing world which hasn’t caused the climate change we face today; it was our industrial revolution that put most of the carbon in the atmosphere. It’s the problem, but it’s also part of the solution. That industrial revolution has given us the science, the technologies and the wealth that should give us a head-start in tackling the consequences. The Government’s Chief Scientific Adviser, Sir David King, has homed in on it. KING: Those countries which have developed good capital wealth through economic growth are the countries that will most be able to adapt to the impacts of climate change as we move ahead. So the first thing is: we all need economic growth not only because we want wealth generation for our societies, but also so that we can face up to the impacts of climate change for our societies and to reduce risks. Now, the second point, then, is: can we manage to reduce carbon dioxide so that the long-term future is maintained at a relatively manageable risk level? That’s the key. Now, in Britain, we are saying, “We will reduce carbon dioxide emissions by sixty per cent by 2050.” We’re also saying, “And we will see to it that it doesn’t damage our economic growth.” That’s very important not only for the British public to understand, but also for other governments to see that Britain can achieve that. HELM: It’s a consoling thought: the best of all possible worlds. But politicians across the developed world rarely face up to the fact that conventional economic growth is not compatible with the urgency climate change demands—they don’t want to confront electorates with the damage they’re doing. And confronting the voters means accounting properly for that damage and setting the balance sheet straight, rather than mortgaging the future. Just as companies shouldn’t flatter their accounts, neither should governments. Martin Weale is Director of the widely-respected National Institute of Economic and Social Research, and an expert in measuring income and in national income accounts. WEALE: One of the difficulties is that, with many of the environmental effects, it’s very difficult to value them. I know the price I pay for my bus fare; I don’t know what sort of price ought to be charged for an emission of one kilogram of carbon dioxide, for example. And people producing national accounts have felt an obvious reluctance to combine what are easily comprehensible transactions with things that have to be evaluated using prices that are made up to a greater or lesser extent. HELM: But isn’t the point that if you don’t put a price on it, actually you’re saying it’s worthless and you’re really assuming the value’s zero? WEALE: Well, I rather agree with that! HELM: Saying the environment’s priceless appeals to the moral high ground. But what it’s really saying is that it’s worthless. So how do we take these new costs from Martin Weale’s accounts and make them operate in the world in which we work and live, and how much difference would it actually make? David Pearce. PEARCE: There can’t just be marginal differences in the prices of these goods. They’ve got to be significantly different to reflect the significant difference in environmental burdens that these goods impose. HELM: So, in the Pearce world, we would go round putting prices on the environment? PEARCE: Absolutely. I think you both try to value environmental goods and services in terms of what people are willing to pay for them, if only they had a market. We then take that information, and we add that as like a premium to a polluting good or, if it’s a clean good, we can think of it as like a subsidy, and what we basically do is we turn nature into a commercial asset. HELM: And what do you say to someone who says, “Putting a price on the environment is immoral, and that what you’re doing is reducing it to just such a commercial product,”—and that, therefore, it’ll just get abused even more than it currently is? PEARCE: I think my response would be that I live in the real world of real policy. I look at the forces that destroy nature, and I try to use those same forces to conserve nature. HELM: Sounds neat. Perhaps too neat when we’re already in a crisis. But what’s the alternative? Mayer Hillman. HILLMAN: Each person in this country is responsible for the carbon dioxide emissions of about ten tonnes each year from all their fossil fuel-using activity. That level of ten has got to come down, per person, to just over one tonne. In order to achieve that degree of reduction—close on ninety per cent—one has obviously to look at those areas which are the most energy intensive. The most obvious area is in the field of transport and, if you look at the phenomenal rate of growth of air travel, you’ll see that that is a very, very obvious candidate. HELM: So there’d be a lot less air travel in your world and probably a lot less car travel, too? HILLMAN: There would indeed be. HELM: And there’s the rub. It’s very radical and it’s expecting a great deal of our politicians—let alone us. But pricing— environmental taxation—is demanding, too. After all, higher prices are just as painful as carbon rations. We can either tell people to slash their carbon emissions or put up the price of carbon: they’re two sides of the same coin. Uncomfortable either way. And for environmental economist, Cameron Hepburn, that’s the point. HEPBURN: I’m certainly not saying that consumers don’t need to change their behaviour and that consumers don’t need to experience some pain. But we shouldn’t expect them to take this voluntarily upon themselves. If we have no other insight from economics, it’s that while people are not purely self-interested, self- interest is a component—possibly a very large component—of behaviour. So what we need are policies to make sure that people face up to the full prices of their activities: that they can’t take ten trips to the continent on easyJet or Ryanair every year. And, as a result, there will be some reduction in economic growth, and this would be part of a package of policies that looks towards the future. HELM: So this isn’t just cosmetic. We’re talking about making some immediate—significant—changes to the lifestyle we’ve grown used to. David Pearce. PEARCE: My guess is that we’re looking at some pretty substantial changes because the signal has to go out, really, in two ways: one, as a kind of short-run shock that draws people’s attention to the fact that these environmental consequences are large; but also we want to send out a signal that perhaps these taxes or charges, whatever you want to call them, will be going up over time as environmental resources diminish and the demands on the environment increase—both through population change and, of course, through economic growth. But there’s a trick and the trick, of course, is that these are the prices you would have to pay if you insist on buying polluting products. So, if you can get the system changed round so that these price increases also serve as the incentive both to change consumer behaviour and to bring in less polluting technology, then you can avoid those taxes. HELM: So they’re sticks? PEARCE: They’re sticks. HELM: But they’re also carrots? PEARCE: They’re the tax that you need never pay so long as you change your behaviour, and don’t buy the goods that carry the larger charges because they’re the more polluting goods. HELM: If you don’t fly abroad or take those now not-so- cheap holidays, you won’t have to pay. That does bring us face-to-face with the consequences of our hedonistic lifestyles—and therefore our obligations to future generations. But forcing this confrontation will require political resolve. At the Environment Agency, Chief Executive, Barbara Young, is wearily familiar with what that means in practice. YOUNG: I don’t think that we’re going to see governments both in the UK and globally having the the courage to really reflect true environmental costs in prices. But I think we can go a way towards that, and then link that with technological development and with information and advice and getting some of the behavioural issues sorted out by that pincer movement of both economic signals and, quite frankly, making people feel bad about doing things that are environmentally hurtful. HELM: So not just the sticks and carrots of prices, but more fundamentally the preferences that go into those prices—the value we put on the rights of future generations. That’s the pincer movement. Barbara Young is right that we have to win hearts and minds. Self- interest is what we may have to assume, but that doesn’t mean we shouldn’t try to educate people, too. On the pricing front, a good example of the sort of short-run shocks David Pearce has in mind has been provided, courtesy of OPEC. The oil price—and therefore the carbon price—has gone from $10 to over $50 a barrel since 1999 and it might go even higher. We see the immediate effects at the petrol pump and in the surcharges on airline tickets—and industry gets a clear incentive to clean up its act, too. Former BP Chief Scientist, Bernie Bulkin. BULKIN: OPEC may have pushed the carbon economy so that its oil finds a ready home in the market. But you could say that this strategy has backfired by having raised the price in the last few years, and we now seem to be in a much higher price band than we were. This opens the door for many alternatives to come in because the cost that they have to meet to be competitive in the market is much reduced. HELM: But there’s no evidence that oil, in the sense of consuming and burning all those resources in the Middle East and elsewhere, is actually being priced out of the market. The demand is phenomenally high and everybody expects the Chinese economy and the American economy and others to keep on burning that oil and putting that carbon into the atmosphere. BULKIN: Absolutely. But it’s interesting to me to see that the Chinese are among the leaders in hydrogen and fuel cells. Just as the Chinese love mobile phones and have skipped over the generation of land lines, they can skip over the internal combustion engine and get right to fuel cells and hydrogen. HELM: Perhaps, but in the meantime the Chinese are rushing headlong into car ownership and are busy building large numbers of polluting coal power stations—more per year than our entire generating capacity. That puts our modest wind farms into perspective. So new technologies have a part to play, but faced with the emergence of such an immense economic power, it’s a question of getting them implemented on the ground. And that’s where behaviour comes in again. Barbara Young. YOUNG: I don’t think the technofix on its own will work. The problem is not just what can technology deliver, but how do we get it adopted? And, particularly, how do we get the rank and file of people to recognise that it’s their individual practices and their individual consumer choices that make an impact as well as governments as a whole taking action? So, for example, you can produce all of the energy efficient cars and vehicles that you like, but if the public continues to buy SUVs and gas-guzzling four-wheel drives, we’ve not cracked the problem. HELM: But some people would say, “Why should people change their behaviour? Why shouldn’t they use more energy? Surely, we can just harness technology? We’ve got nuclear power, we’ve got alternative fuels going forward. Isn’t this just an industrial problem?” YOUNG: Well, I think the issue there is we don’t yet know whether we can produce a no-carbon economy and, secondly, it’s a very long time in coming. HELM: History’s not quite on Barbara Young’s side. In the past, technology has delivered—and more quickly than expected. Long before coal ran out, we got oil and electricity. And, in time, we’ll probably have hydrogen fuel cells and even fusion nuclear power. Although we might not. Economist, Martin Weale, at the National Institute. WEALE: Obviously, if the technology doesn’t deliver, you’ve bet the bank on a horse coming in and the horse doesn’t come in, then you’re left with large debts—or our descendants are left with large debts and they may not thank us for it. But suppose the technology does come along. How can we actually impose on our children the burden of supporting us in our old age? It essentially has to be done through the tax system. It can only be done by having the Government borrow money and force our descendants to pay taxes to service it. If Britain decides to follow this live-now-and-let-the-future- pay policy, our descendants will have very high tax rates in Britain, and they’re likely to conclude that they’d be better off living in some other country that didn’t take quite such a cavalier attitude to the future. HELM: It’s not just about moving money among ourselves in the current generation or two—borrowing and spending now and taxing later. It’s about transferring money between generations that are separated over perhaps hundreds of years. But why should we—our generation uniquely—pay that price? Past generations haven’t. Why shouldn’t future generations contribute by paying us to clean up our pollution so that their world is better—a sort of intergenerational Treasury bond? It’d be rather like a much longer version of the fifty-year bond announced in last week’s Budget. Cameron Hepburn. HEPBURN: There are two ways of thinking about that. Firstly, we might pay the price because we’ve been reaping the benefits of the Industrial Revolution and it’s indeed that revolution that is causing a lot of the problems—so along with the benefits we need to turn around, look hard at ourselves and say, “Maybe we should pay the costs of this as well.” But the second way of answering it is to say that, indeed, “Why should we pay for it when it’s far distant future generations who are going to be benefiting from our policies today?” And so there are various proposals to issue very long-dated government bonds that create a transfer of wealth from the far distant future to us today, so that we bring unborn generations to the negotiating table and say, “It is in your interests that we protect the environment for you. We currently do not have any incentive to do that because it doesn’t affect us. You have that incentive but you have no way of paying us to do that. Let’s construct an economic instrument, a long-term government bond, that provides the current generation with the incentive to act on behalf of future generations, and that way it isn’t us who’s paying for it.” HELM: Yes, they have a contribution to make in helping us convert away from our overwhelmingly carbon-based economy— and accommodate another three billion people. But we can’t pass the buck entirely because we can’t rely on economic growth and technology delivering all the goods. So there’s no get-out-of-gaol card. We have to face up to some of the cost now, and so far we haven’t. The good news is that it’s do-able. The bad news is that it will be very unpopular—and it needs political will. But without that it really is doom and gloom which the dismal science can only document. 4