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Charles Sabel and David G. Victor counsel that we should not despair about the climate crisis. Despite decades of foot-dragging, incremental policies, and increasing emissions, they believe that we can accelerate decarbonization through experimentalist governance. They view climate change largely as a technical problem rather than a political one. With the right institutions, they argue, we can structure learning processes to promote problem-solving.
The authors’ optimism is commendable but mistaken. Experimentalist governance puts the cart before the horse. Until governments address the conflicts between the winners and losers of climate change and climate policy, experimentalist governance will be limited in its ambition and impact.
In new work with Thomas Hale and Jeff Colgan, I suggest existential politics as an alternative approach that brings distributional conflicts to the fore. Existential politics is about whose way of life gets to survive. Should we have Miami Beach and the Marshall Islands, or should we have coal miners, ExxonMobil, and Chevron? Some actors will inevitably lose everything—either due to environmental policies or due to the effects of climate change. And both winners and losers will fight like hell to maintain the value of their assets. This obstructionism, not technical problem-solving, is the critical constraint thwarting progress on global climate policy.
In a simplified model of existential politics, the world can be divided into two groups: owners of climate-forcing assets (such as oil and gas firms or heavy industry), and owners of climate-vulnerable assets (such as coastal homeowners and farmers or laborers in climate-vulnerable industries). Ambitious climate policy will devalue—or even destroy—climate-forcing assets (CFAs). Recent news about oil majors’ big write downs and Exxon’s removal from the Dow Jones Industrial Average has prompted warnings that the end is nigh for the oil industry. While this assertion is debatable, climate policy (as well as the economic downturn resulting from COVID-19) is changing the value of this once indispensable resource. By contrast, NextEra Energy, a utility with a large renewable portfolio, briefly became the most valuable U.S. energy company this month, overshadowing Exxon.
Meanwhile, owners of climate-vulnerable assets (CVAs) face existential threats from the effects of climate change. Perhaps the most dramatic example is that some low-lying island states could completely disappear with sea-level rise. The housing market in Florida, which is particularly vulnerable to rising sea levels, already shows signs of revaluation: both sales and sale prices are falling. The insurance industry, too, is under threat—more extreme weather means bigger payouts. The ongoing 2020 California wildfires have intensified insurance companies’ retreat from high-risk areas. If homes are uninsurable, spillover effects will dampen the mortgage market as banks pull back their lending for risky assets. Ripple effects will harm the reinsurance industry, which provides insurance for insurers. As risks intensify, the scale of their spread will too.
Of course, many actors hold both types of assets. Moreover, some will be able to trade one set of assets for another relatively easily, while others will be locked in, shifting both vulnerabilities and, potentially, their political alignments. Typically, holding valuable assets means more power—including greater power to obstruct. CFA owners have historically occupied this role and have been well organized in mobilizing to protect their interests; they have successfully obstructed aggressive climate measures. By contrast, CVA owners tend to be diffuse and less organized. Yet at least some indications suggest that this is changing. Litigation against fossil fuel companies has surged; New York and California have led the charge, seeking compensation for damages incurred due to climate change. Still, we can expect obstructionism—the main obstacle to decarbonization—to again intensify as revaluation ramps up.
In sum, while in many cases we do know how to decarbonize, powerful forces are fighting against it. There are technical problems that require problem-solving, of course, but they are not the primary constraint on ambitious climate policy. Global climate governance must address politics before policy.
Yet, for Sabel and Victor, politics lurks amorphously in the background, in the form of the penalty default—the incentive or punishment that persuades actors to problem-solve together. In reality, the penalty default is where politics happens. It is shorthand for government intervention—to create incentives for leaders and sanctions for laggards. Yet such intervention requires more than “thin consensus.” Governments must be willing and able to legislate.
The cases on which Sabel and Victor ground their optimism had already addressed the fundamental conflicts of existential politics before the problem-solving victories that they describe. As David Vogel recounts in California Greenin’ (2018), the creation of the California Air Resources Board (CARB) occurred against the backdrop of a long-standing fight against air pollution in Los Angeles and, later, across the state. For years prior to CARB’s creation, the real estate, agriculture, and tourism industries advocated for more stringent regulations to address smog. Regular “smog attacks” and deaths from smog provoked outrage and public pressure for action. Citizens mobilized a grassroots anti-smog organization. Even the city’s most powerful business actor, the Los Angeles Area Chamber of Commerce, pushed for regulation.
Unsurprisingly, the fossil fuel industry initially opposed regulation. However, converging political pressures for regulation, coupled with threats from the Los Angeles Times that it would use the publication as a means to publicly shame oil companies, prompted a change of position; oil companies recognized the threat both to their communities and to the long-term viability of their business. Once the obstructionists had reversed course, the technical processes of standard-setting and regulation could proceed in earnest. And when the government of California chose to regulate, it disarmed potential obstruction from the car industry. Largely located outside the state, it had to abide by the new rules or face losing 10 percent of its consumer base.
A similar story applies to the ozone layer. Chlorofluorocarbons (CFCs)—a major ozone-depleting substance—were produced by relatively few firms, which were concentrated in the United States, Japan, the United Kingdom, and France. DuPont was the world’s largest producer of CFCs, and while it initially opposed regulation, it had a change of heart when it realized that it could own patents for CFC alternatives and dominate an emerging market. It called for international regulation to ensure that CFC production wasn’t simply shifted to unregulated areas (thus undercutting its business), and it turned the threat of asset devaluation into an opportunity by making new, regulation-compatible investments and shifting long-term asset holdings. With this industry support, the U.S. government enthusiastically backed the Montreal Protocol.
Tellingly, the Montreal Protocol has been less successful where political conflicts were not resolved in advance, as is the case with regulation of methyl bromide, another ozone-depleting substance. The chemical was technically phased out in 2005 under the flexible terms of the protocol that Sabel and Victor identify as one of its main strengths. But the U.S. agriculture industry, particularly in California, argued that it would be unable to compete with foreign producers without continued use of methyl bromide. The result was a generous loophole that allows for “critical use exemptions.” Though there have been reductions, methyl bromide allotments are still made annually to (mostly developed) countries requesting exemptions. The flexibility of the Montreal Protocol has allowed for adjustments that contravene the primary goal of the treaty, to reduce the production and consumption of ozone-depleting substances.
These examples illustrate that any effective decarbonization policy must confront the reality of asset revaluation and find strategies to address the opposition of those who will lose from climate change and climate policy. Most of this activity will occur on the domestic, rather than the international, level.
Discussions of a just transition away from fossil fuels encapsulate this approach. How do we compensate workers who will be affected by decarbonization policies? Some proposals suggest using workers in the fossil fuel industry to cap abandoned oil and gas wells which leak methane, a powerful greenhouse gas. Others have called for nationalizing the oil industry, which has made minimal progress on decarbonization. In this era of cheap oil, nationalization is a relatively inexpensive proposition: the Next System Project estimates it would cost $550–700 billion in the United States. More generally, industrial policy—governments’ investment to promote economic growth—can be used as a tool to compensate CFA owners and empower new coalitions for decarbonization.
More importantly, though, existential politics demands that we expand our understanding of multilateral institutions as engines of ambitious climate policy. Border tax adjustments and carbon tariffs—which would levy carbon taxes on imports based on the carbon emissions they produce—have emerged as serious proposals in the European Union and from President-elect Biden. I have argued for reducing offshore tax shelters as an important element of climate policy. We know that climate change is driven by the world’s rich: 1 percent of the population produces more greenhouse gas emissions than the poorest 50 percent. Tax evasion contributes to this problem. The world’s wealthiest citizens (the top 0.01 percent) hold roughly 10 percent of world GDP in offshore tax havens. Repatriating these funds would reduce the wealth and the structural power of many CFA owners. In short, we need to think about multilateral cooperation beyond the Paris Agreement, looking to the many other multilateral institutions that can help address obstructionism to decarbonization.
Sabel and Victor have the proposals right, but the order wrong. Various sectors can do more to overcome specific technological problems and implementation challenges, but only after basic material conflicts are resolved. And this will require confronting existential politics.
Jessica F. Green is Associate Professor of Political Science at the University of Toronto and author of Rethinking Private Authority: Agents and Entrepreneurs in Global Environmental Governance.
Biden may have rejoined the Paris Agreement, but diplomacy isn’t enough. To decarbonize the economy, we must integrate bottom-up, local experimentation with top-down, global cooperation.
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