Policy Change, Not Climate Change
Long Jing Village, Hangzhou. Photo by Ginny Ip / In Our Nature
The current global climate change problem results from decades of strong economic growth without adequate policies. Nowhere is this more clearly visible than in China, where rapid sustained economic expansion fueled by heavy industry and coal has led to worsening pollution levels that are posing serious health risks to the population. Thus, while climate change was previously regarded as of secondary importance next to economic development and pressing social issues, the Chinese government has placed environmental concerns at the top of its agenda in recent years, taking serious steps to promote clean renewable energy technology and enforce environmental laws.
In contrast to many Western countries, which often emphasize individual moral responsibility for their consumption choices as a solution to environmental problems, China relies on top-down, government policies that some have dubbed ‘environmental authoritarianism.’ The former strategy lends itself to low participation as a result of collective free-riding behavior; conversely, the latter generates high participation but at the high costs of enforcement and self-autonomy. In both cases, the policies are inefficient, and the effects on the environment are paltry at best.
A case in point is the policies relating to recycling and waste disposal. In the United States, few laws and regulations exist surrounding waste on the national level – instead, the nation tries to encourage people to ‘do their part’ for the environment through educational campaigns and media support. On the other hand, China has recently launched a strict new recycling law in pilot city Shanghai, where households and firms are held responsible to sort their waste into four categories or risk steep fines and social credit penalties. However, while an estimated 30,000 people have been employed to supervise, educate and enforce these rules, this is hardly sufficient for a population of 23 million – people are still getting away with throwing their trash in the wrong bins.
The reason is simple: although the level of awareness and understanding of environmental sustainability has increased in China, especially among the educated, environmentally based consciousness remains shallow and lacking among the general populace. Without the motivation to do their part for the environment, it is in the individual or firm’s best interest to find a way to avoid paying the extra cost. Indeed, in China, despite serious attempts to establish comprehensive regulations and laws for its natural resources, these laws have been violated time and time again. Moreover, because Chinese people are relatively new to the concept of tax-paying, evasion is high for environmental taxes that have been placed on high-sulfur coal and other dirty fuels and chemicals, eroding their effectiveness.
Thus, rather than dis-incentivizing non-compliance to manage pollution, a more effective method is to incentivize compliance, as such policies often rely on the market forces of supply and demand and therefore require minimum enforcement costs. Taking the example of recycling further, neighbouring state Taiwan implemented a new waste management framework in 2001 that includes the ‘4-in-1 Recycling Program,’ which incentivizes both manufacturers and citizens to reduce trash and increase recycling. While general trash must be disposed of in specific ‘blue bags’ that must be purchased and increase in cost as the size of the bag increases, recyclables like aluminum, paper and plastics can be placed in any bag. Further, rather than leaving one’s trash by the curbside like in America, the policy requires residents to take their trash out everyday when the garbage trucks arrive at their scheduled time. While perhaps inconvenient, the practice increases the policy’s effectiveness, as it eradicates the ‘tragedy of the commons’ problem: Those caught trying to get rid of their trash improperly risk being publicly shamed by their neighbours.
Given similar cultural values that emphasize unity and harmony, such a system that is self-enforcing has a high likelihood of doing well in China, especially in tight-knit villages and communities that don’t currently have recycling requirements. Alternatively, big cities like Shanghai can adopt Taipei’s innovative, market-based solution to recycling: implementation of smart recycling booths around the city that add value to one’s mass transit access card for every recyclable bottle or can. Though requiring some level of investment upfront, the costs are worthwhile, as it not only incentivizes people to hold onto their recyclable items instead of dumping them in the nearest trash can, but it also simultaneously encourages the use of public transportation as opposed to driving.
The Bund, Shanghai. Photo by Ginny Ip / In Our Nature
Regarding the governing of the wider environment, one system pushed forward by many environmental economists is the issuance of emission permits that can be traded on the market – widely known as ‘cap-and-trade.’ This method works especially well in the case of natural resources, such as air and water, that are not privately owned by any individual, because it effectively places a market price on (previously free) greenhouse gas emissions and gives property rights of air and water to individuals, who can sell it to others in the form of tangible permits. This means that through market forces whereby each individual agent makes their own decisions for their own benefit, the amount of pollution will be the optimal one with minimal top-down intervention. All the government has to do is decide exactly how much of a greenhouse gas can be emitted in a given period and issue the permits accordingly.
Some have pointed out that an authoritarian state such as China is unlikely to accept such market-based solutions to environmental problems, despite recent opening of doors to the international stage. However, it must be noted that such a policy is still fundamentally controlled by a central authority – in deciding how much pollution can be emitted and in enforcing it. In fact, a system of emissions trading for sulfur dioxide is already being tested in some Chinese cities and may eventually be applied nationwide.
However, a grave problem exists with such a policy: Its effectiveness will always be limited, unless implemented globally. This is because if only a few countries enact cap-and-trade, firms and individuals will be incentivized to move production to places where the price of emissions is zero. In other words, because the problem of climate change is a global one, collective action on a global scale is required to solve it. This means that some form of agreement needs to be reached between all countries in the world, and an international governing body – perhaps the United Nations – needs to implement and enforce such a scheme.
The biggest barriers preventing this from coming to fruition are that each country’s level of development and endowment of natural resources are inherently different. Complicating the picture further is the fact that industrialized countries are mainly situated in temperate areas, and therefore have the least incentive to mitigate the effects of climate change. By contrast, most of the world’s poorest countries whose economies are tied closely to their natural environments have the most to lose from climate change, yet they have the least ability to adapt to and mitigate its effects. Furthermore, the long time scale of the problem makes it difficult for presidents to prioritize the environment during their relatively short terms in office while imminent social issues demand immediate attention and produce concrete results.
Thus, overcoming these barriers will no doubt require countries to put aside their pride and communicate effectively with one another through mutual understanding – a tall order given today’s political climate. Indeed, it is the lack of such understanding that led to the failure of the Kyoto Protocol to achieve universal ratification in 2012. Significantly, the three biggest climate players - the United States, China and India - have consistently failed to accept the terms of agreement because the latter developing countries argue that it’s unfair to pay for the pollution that the West created for centuries to grow their economies, while the former points fingers at them for being the major polluters today.
Nevertheless, one thing is clear: The task of slowing climate change cannot be left to be solved by science alone. Understanding the laws of the natural physical world and inventing eco-friendly alternatives to current must-haves such as electric vehicles are only the first step. To actually fix the problem requires us to direct our attention on economic and political aspects of the issue. Fortunately, as we’ve discussed, the economic solution to climate change already exists – the challenge lies in implementing it. As Nobel Prize winning economist William Nordhaus said: The secret to success lies not in expensive, ambitious projects such as electric vehicles, factory relocation and ‘sustainable city’ projects (i.e. China’s environmental agenda), but in “universal, predictable, and boring” policies such as cap-and-trade.
Sources
4-in-1 Recycling Program (Environmental Protection Administration Taiwan, n.d.)
China’s Economic Rise: History, Trends, Challenges, and Implications for the United States (Congressional Research Service, 2019), pg. 29-30
The Economics Book (Dorling Kindersley Ltd., 2012), pg. 306-309
Gregory C. Chow, Economic Analysis of Environmental Problems (World Scientific Publishing Co. Pte. Ltd., 2015), pg. 33
Lily Kuo, ‘A sort of eco-dictatorship’: Shanghai grapples with strict new recycling laws (The Guardian, 2019)
Marcello Rossi, How Taiwan Has Achieved One of the Highest Recycling Rates in the World (Smithsonian, 2019)
William Nordhaus, The Climate Casino: Risk, Uncertainty, and Economics for a Warming World (Yale University Press, 2013)