811. Green Capitalism: The Denialism of Progressive Environmentalists

Pie in the sky

By  Bill Blackwater, Monthly Review, June 2012

In 2003 Ted Nordhaus and Michael Shellenberger, two prominent environmental lobbyists, founded the Breakthrough Institute, a think tank dedicated to modernizing what they call “liberal-progressive-green politics.” Its focus is on winning support from mainstream businesses, politicians, and consumers with an attractive message: by developing the right technologies and policy tools, tackling climate change and increasing wealth can go hand-in-hand.

In their essay, “The Death of Environmentalism” (2004) and book, Break Through: Why We Can’t Leave Saving the Planet to Environmentalists (2007) Nordhaus and Shellenberger focus on educating and disciplining environmentalists to work with the grain of capitalism, rather than against it. Most of all, this has meant attacking that core principle of environmentalist thought—there are limits to economic growth. They say that this is both too negative in tone, and fundamentally wrong when it comes to tackling climate change. It will require massive investment in low carbon technologies, they argue, which in turn will depend on strong and ongoing growth.

In practice, the approach they have adopted to boost the influence of their message (and themselves in the process) is to characterize all opinion within the environmental movement that is redder or greener than theirs as marginal, unrealistic, immature, or elitist. Far from being alone in this, Nordhaus and Shellenberger are representative of a wider school that might be called “progressive environmentalists.” They have even spawned a number of imitators, which David Roberts has described as “the Breakthrough crowd.” Their position is essentially the same as that of the New Democrat and New Labour camps regarding the environment; and their tactics of triangulation are precisely those pursued by the New Democrats and New Labour since the early 1990s.

The faults of this progressive environmentalism, in trading long-term transformational ambition for short-term success, are equally familiar. The triangulation tactics of the likes of Clinton and Blair achieved some conspicuous electoral successes, but they did so at the expense of weakening the left’s capacity to mount a fundamental challenge to the basis of financialized capitalism. This was starkly revealed by the inability of left-wing parties to capitalize on the economic crisis since 2008, either by winning the intellectual argument against neoliberalism or by gaining clear electoral support.1 The approach of progressive environmentalism, meanwhile, is calculated to achieve short-term popularity, since it is stuffed with business- and consumer-friendly wishful thinking. But this must be at the expense of weakening the capacity of the environmental movement to highlight the unsustainability of our economic system and concomitant need for radical changes.

Both in the content and practical effects of their positive ideas progressive environmentalists are not dissimilar from the environmental spokespeople (or self-styled “skeptics”) of the right—the kind, exemplified by Julian Simon and Bjorn Lomborg, who churn out panglossian accounts of how every environmental challenge will be overcome by the genius of capitalism. By virtue of their starting positions, however, they are very different. Nordhaus and Shellenberger are genuine environmentalists, possessing a detailed understanding of the challenges of climate change, and a sincere interest in finding practical measures that would decarbonize the global economy. The classic denial of the right-wingers rejects climate change itself: either that it is a problem, or that it even occurs at all. But what the progressive environmentalists deny is the impossibility of the economy to find ways, through enlightened policy tools and technological development, to evade environmental limits for the foreseeable future. Of course, this is denied by the right-wing environmental skeptics, too; but with them this is less active, since they deny that environmental limits pose a threat to growth in the first place.

What makes Nordhaus and Shellenberger particularly worth studying is precisely the gulf between the scientificality of the challenges they set out and the daydream quality of their positive solutions. To focus on them is to witness, in their leaps of logic and lapses of reason, evidence of the psychodrama wrought by the denial of something one subconsciously suspects to be true. To view this evidence is to see a vivid illustration of the wider, if less active, practice of denial across Western society at large, in the face of a challenge which renders its dominant economic system unsustainable.

Rebound and Denial

Nowhere is the gap between analysis of the problem and prescription of the solution wider than in Nordhaus and Shellenberger’s writing on the “rebound effect.” Sometimes called the “Jevons Paradox” (after the nineteenth century British economist, W.S. Jevons, who first wrote about it), the rebound effect describes the phenomenon by which an increase in the efficiency with which energy is used tends, by lowering its costs, to result in an increase in overall consumption. In February 2011, Nordhaus and Shellenberger (along with Jesse Jenkins, Breakthrough’s director of energy and climate change) published a compendium of research on the subject.2 It is an astonishing read.

What makes it so remarkable is its detailed exposition of the problem. It is a devastating critique of the positive arguments around achieving a business-friendly salvation from global warming through investing in energy efficiency, which are the stock-in-trade of progressive environmentalists—specifically including Nordhaus and Shellenberger themselves on other occasions.3 But the truly extraordinary thing about the report is that at the end of this relentlessly critical analysis, the authors are still parroting their faith in the good news: all the problems in cutting emissions will only work to our collective advantage, by…fuelling economic growth, which is, they assure us, the only path to decarbonizing the global economy!

It is worth going through their arguments in detail, given the thoroughness of their job in considering the rebound problem—indeed, they offer a taxonomy of it.

The first form they discuss is “direct rebound,” which in turn is made up of the “income effect” and the “substitution effect.” Following an improvement in energy efficiency, the cost of energy use will fall, in turn increasing demand for that service or product (the “income effect”; for example, driving a more efficient car more often). This leads to the adoption of new uses of energy in place of more labor-intensive activities (the “substitution effect”; for instance, using a dishwasher rather than doing dishes by hand). The authors assess direct rebound as being generally moderate in developed economies, eroding around 10–30 percent of the energy savings due to efficiency measures.

Next they consider “indirect rebound.” A major element of this comes from the embodied energy in materials used to improve energy efficiency; double-glazed windows are a classic example. They conclude, from the embodied energy effect alone, that there are rebounds of 1–15 percent from energy-efficient new buildings. This rebound also comes in the form of capital equipment which is used to increase energy efficiency in industrial production. Rebounds increase as firms pursue incremental efficiency improvements over time, suggesting diminishing returns; this, in turn, undermines the optimistic suggestion that technological progress will be able to deliver greater and greater energy savings into the future. There is also the “respending effect,” whereby consumers spend the savings they make from lower energy costs on other goods and services, in turn boosting their production and the amount of energy embodied in them. The total respending effect for consumers could drive rebounds of the order of 5–35 percent.

Next, Nordhaus, Shellenberger, and Jenkins consider macroeconomic effects such as “market price effects.” Energy efficiency improvements lead to a sharp decrease in demand for a particular fuel, upon which the resulting drop in price results in a strong bounce in demand once more. The authors suggest that this could be an especially big factor in the developing world, where there is a large amount of untapped (elastic) demand for energy, held in check only by cost. Of more relevance to Western economies would be “composition effects,” whereby improvements in energy efficiency would by disproportionately favoring energy intensive industries lead to their expansion. The third macroeconomic factor considered is the largest and most obvious: the “economic growth effect.” Not only will energy efficiency stimulate higher output directly, it will also lead to lower costs for energy services; in turn this will translate into an increase in real income and stimulate economic growth, therefore leading to greater consumption of energy.

The further issue is “emergent rebound.” Different aspects of rebound will reinforce each other, creating an overall rebound effect that is greater than the sum of its parts. Since most existing studies only consider these aspects individually, most of the existing quantifications of rebound are likely to be underestimates. One of the examples they suggest for emergent rebound is that energy efficiency improvements usually accompany improvements in the efficiency of capital and labor, fuelling economic growth and hence enhancing their rebound effects. Where there are major advances in energy efficiency—especially in technologies such as lighting, engines, motors, and computing—there may be “open opportunities for newly profitable uses of energy—as yet unforeseen new energy-using applications products, enterprises, or even whole new industries emerge.” They call this the “frontier effect.”

As a result of these insights they mount an attack on the “natural capitalism” school of environmentalists, those—notably Amory Lovins of the Rocky Mountain Institute—who have specialized in making environmentalism popular by stressing the economic benefits of energy efficiency to business. They cite Lovins on the numerous “side benefits” of energy-efficient investments—for instance, “retail sales pressure can rise 40% in well-daylit stores”—as well as arguing that, in efficient buildings, “labor productivity typically rises by about 6–16%. Since office workers in industrialized countries cost ~100x more than office energy, a 1% increase in labor productivity has the same bottom-line effect as eliminating the energy bill—and the actual gain in labor productivity is ~6–16x bigger than that.”

As Nordhaus, Shellenberger, and Jenkins comment: “If the economic impact of labor productivity improvements from efficient buildings is several orders of magnitude greater than the simultaneous savings in energy consumption…then the rebound due to economic growth/output effects alone should also be several orders of magnitude greater.” But they are not finished here.

Next they cite ecological economists, such as Cutler Cleveland and Robert Kaufmann, who believe that the macroeconomic effects will be bigger than projected in other studies. Cleveland and Kaufmann believe the relationship between the cost of energy and rate of growth is much closer than is understood by neoclassical economics. The corollary of this is that energy efficiency improvements will lead to higher growth and waves of rebound than previously estimated. One of the supports Nordhaus, Shellenberger, and Jenkins give for this position is an argument of Kaufmann’s: that the improvements in the energy intensity of the economy (i.e., the ratio of primary energy inputs to real GDP) that have been observed over the past half-century can be put down entirely to improvements in the quality of fuels used—the successive shifts from wood, to coal, oil, natural gas, and the increasing use of electricity—rather than improvements in technology. This completely undermines the case of those (not least Nordhaus and Shellenberger themselves) who harp on humankinds’s innate, innovative technological genius to deliver radical reductions in energy consumption and carbon emissions into the future.

But perhaps the most significant implications of this work come not from the report itself, but from the press statements Breakthrough put out to accompany it.4 As Nordhaus and Shellenberger commented, “The findings of the new report are significant because governments have in recent years relied heavily on energy efficiency measures as a means to cut greenhouse gases.” And yet the leading studies on the economics of climate change mitigation—including the Stern Report, the Intergovernmental Panel on Climate Change’s Working Group III assessment reports, and McKinsey’s Global Greenhouse Gas Abatement Cost Curve—“have ignored or dismissed the strong evidence for rebound…resulting in climate mitigation scenarios that conclude that large emissions reductions can be achieved through greater efficiency.” The result is “a dangerous over-reliance on energy efficiency in climate mitigation strategies.” While not spelled out, the clear implication of this is that carbon mitigation will cost more than in the most high-profile estimates, and that we are even further away from a pathway towards a global decarbonization target than is generally accepted.

The Breakthrough document is devastating to the whole project of “ecological modernization.” That movement, pioneered by the likes of Lovins in the 1970s and gaining momentum following the Brundtland Commission on sustainable development in the late ’80s, asserts that, with the right alignment of regulations and incentives, business-as-usual capitalism can be made compatible with environmentalist objectives. Indeed, while the Breakthrough report does not explicitly name capitalism as the problem, it seizes on the logic of the capitalist system as a whole as the reason why Lovins’s approach is both shortsighted and doomed to failure. As the authors make clear, “given the drive to maximize profits” (emphasis added), increasing the productivity of raw materials will not lead to a reduction in demand, but rather “will spur substitution of that input for other factors of production and/or increase economic production, output, and growth.” This is true to Jevons, the originator of the rebound argument, who was clear that even where increased efficiency did not lead to rebound within an individual concern, the pressures for growth within the economic system meant it would still rebound across the economy as a whole.

The conclusion that Nordhaus, Shellenberger, and Jenkins append to their paper is a three-part argument. The initial premise is that there are good reasons to accelerate the adoption of energy efficiency improvements “even though such measures may be unlikely to result in a significant reduction of long-term global energy demand or associated carbon emissions.” That is because, “While rebound or backfire may indicate that the pursuit of below-cost energy efficiency improvements does not make for particularly efficacious climate policy, the corollary to this conclusion is that such efforts probably make for very good economic policy. Accelerating the adoption of below-cost efficiency improvements is likely to result in greater economic productivity and growth.”

In other words, while energy efficiency fails to be good for the environment because it leads to economic growth, we should still pursue it because…it leads to economic growth, and this is good because it will make us richer.

The second premise is that, as energy efficiency will not deliver absolute reductions in energy use and carbon emissions, we should “focus primarily on shifting the means of energy production…relying on zero-carbon and renewable energy sources to diversify and decarbonize the global energy supply system.”

Finally, the conclusion which ties these premises together is that, “A wealthier world, using energy more efficiently and productively, is a world with greater resources to devote to both decarbonizing its energy supply and adapting to those impacts of climate change that cannot be avoided.” And thus, since economic expansion is “driven in part by energy productivity improvements,” and since it “can facilitate the accelerated decarbonization of the energy system,” then “Below-cost efficiency opportunities should therefore be vigorously pursued.”

Herman Daly once characterized this kind of argument, made by apologists for the environmental consequences of economic growth, as “hair of the dog that bit you.” Nordhaus and Shellenberger surely deserve some kind of award for pushing this argument to new limits of self-destructiveness.

Wishing for the Right “Kind of Prosperity”

Of course, Nordhaus and Shellenberger themselves would demure and stand by the logic of their case. Above all, they would argue that decarbonizing the global economy will require enormous investment in low carbon infrastructure: How would that investment be found, if not under conditions of continued economic growth?

The weaknesses in their case can be shown by examining one of its main supports—the idea of the “Environmental Kuznets Curve” (EKC). It parallels an argument made by the economist Simon Kuznets in the 1950s: as economies industrialize, inequality will first grow before declining, as greater wealth becomes more evenly distributed. The environmental adaptation of this argument asserts that pollution first grows before reducing, as a wealthier society invests more resources in cleaning up the environment. Nordhaus, Shellenberger, and Jenkins describe their understanding of the EKC:

there is the well-established relationship between societal affluence and investment in noneconomic amenities, specifically ecological amenities (a concept pioneered by Kuznets). Wealthier societies are more capable and willing to pay higher costs for cleaner energy supplies, and rising demand in modernizing societies for ecological amenities, specifically cleaner air, has been a major driver of the decarbonization of energy supply over the last century or more.5

In framing their version of this idea, Nordhaus and Shellenberger explicitly draw on Abraham Maslow’s “hierarchy of needs,” whereby successive levels of physical, emotional, and social security must be met before an individual can develop themselves personally and in accordance with higher ideals. As people get richer and their immediate needs for food, shelter, and material goods are met, they turn their attention to the quality of the environment they are living within, and begin to divert an increasing amount of wealth and attention to improving it. Nordhaus and Shellenberger conclude, “Given that prosperity is the basis for ecological concern, our political goal must be to create a kind of prosperity that moves everyone up Maslow’s pyramid as quickly as possible while also achieving our ecological goals.”6

Unfortunately there are a number of problems with this argument. First, it is incorrect to imply that the concept underlying the Environmental Kuznets Curve derives from Kuznets himself, since there is no direct link between the mechanics of economic growth and income distribution that he was describing, and the relationship between wealth and environmental quality asserted by the EKC. Aside from the name, the only relationship between the original Kuznets Curve and the environmental version is that both are depicted in the form of an inverted “U” (i.e., a line on a graph, standing for something undesirable, which rises and then falls). This in itself is no more a “concept pioneered by Kuznets” than the commonplace remark that things often get worse before they get better. In any case, and more seriously, the original Kuznets argument has been falsified by the widening inequality in Western economies over the past four decades. The EKC actually hails from the early 1990s, notably from a World Bank report which argued that “it is possible to ‘grow out’ of some environmental problems.”7 This leads to the second problem with Nordhaus and Shellenberger’s argument: the EKC is not supported by the evidence. As the environmental economist Paul Ekins has found in a comprehensive review of that World Bank report and similar efforts, “the evidence of an EKC, even for any single environmental indicator, is inconclusive, and certainly cannot be generalized across environmental quality as a whole…. As a generally applicable notion, the ‘environmental Kuznets curve’ (EKC) hypothesis can be deemed invalid.”8

As if that were not enough, the next problem is the way in which Nordhaus and Shellenberger concentrate solely on one element of the environmental consequences of economic growth—carbon emissions. In this they perform intellectual sleight of hand. They are quick to criticize other environmentalists for arguing that there are limits to economic growth, but the only limit they pay attention to is atmospheric concentrations of greenhouse gases. About a range of other limits—such as biodiversity, availability of freshwater, and soil nitrogen—they have nothing to offer. This is unsurprising: these wider limits cannot be overcome, even in theory, by investments in low-carbon technologies financed by ongoing growth.

Even accepting their terms and concentrating only on carbon emissions, Nordhaus and Shellenberger are misapplying the central logic within the idea of the EKC. They make great play of the way in which environmentalists are stuck within a “pollution paradigm,” harking back to campaigns to improve individual aspects of environmental quality, such as cleaning up lakes and reducing local air pollution. This will not work for global warming, they argue, since the key to tackling this is the creation of zero carbon infrastructure, which will in turn require the unleashing of the creative forces of economic development.

In making this argument, however, it is precisely Nordhaus and Shellenberger who are stuck within their own pollution paradigm. Where the EKC has any purchase is precisely in the area of local pollution. Urban air quality in affluent regions has improved since the 1950s with the passing of clean air acts, deindustrialization, and improvements in motor vehicle technology. But where there is no evidence for an EKC is in the net impact of economic growth on the environment overall. Carbon emissions are, in fact, a near perfect anti-argument to the EKC, since they are both so intimately associated with economic growth and, in themselves, non-polluting in an immediate sense, being neither toxic to breathe nor even personally noticeable. The logic of the EKC will tend to lead towards measures which simply improve the ambient environment of wealthy areas, for instance by locating power plants and heavy industry elsewhere, allowing more affluent consumers to continue enjoying the economic benefits of fossil fuels without so much of the accompanying local pollution—that is, local to them.

There is a further weakness in this use of the EKC, which is a deafness to its logic shared by most of its proponents. The EKC is most commonly used by right-wingers as a rhetorical weapon against environmentalists and their arguments in favor of regulation and against the untrammeled pursuit of growth. It is deployed as an argument that economic growth is not the enemy; the market will, if left to its own devices, clean up its own environmental mess. Mikhail Bernstam even talks about an “Invisible Environmental Hand.”9 What this ignores is the agency of these individuals whose greater affluence allows them to focus on less immediate, material needs, and through whose collective activity society is said to clean up the environment it lives in. Partly, this is a story of taking political action to impose state regulation on the economy. Proponents of the EKC are happy to reference the effects of such action, for instance of clean air legislation passed in the 1950s, but unwilling to acknowledge the story that lies behind them—since this is the very antithesis of their story about the market spontaneously solving its own problems. But if political action to curb the activities of private enterprise and shape the habits of private life has been crucial to improving environmental quality in some areas in the past, why should it not be the key to tackling the environmental problems confronting us today?

There is a final and related problem with these arguments. The logic of the EKC suggests that, as society becomes wealthier, it also becomes less preoccupied with material concerns and thus begins to give greater value to other things, including preserving natural landscapes and wildlife in their own right. What else is this other than an argument that after a certain point of economic development, people do not want growth to be pursued at all costs? This implies that economic growth both must and should be restrained—must, because this is necessary to prevent further environmental destruction; and should, because this is what the people want. Any proponent of the EKC, if they want their theory to be verified in reality, should be encouraging environmentalists to bring the consequences of growth to the public’s attention, so that it can fulfil its essential political role and collectively restrain the activities of private enterprise.

The overriding problem Nordhaus and Shellenberger face is making the case that the environmental gains that come in their theory from economic growth will outpace—dramatically so, in the case of decarbonizing a growing economy—the despoliation attendant on that same growth. In practice, they hardly ever make the attempt, merely advancing this as an article of faith. The best they do is a repeated insistence that economic growth should be of the “right kind”—but what this actually means and how it could be guaranteed they decline to say. Their positive ideas remain on the level of simplistic wish-fulfillment.

Take, for instance, the following remarks defining their own vision of environmentalism: “It will see in institutions like the WTO, the World Bank, and the International Monetary Fund not a corporate conspiracy to keep people poor and destroy the environment, but an opportunity to drive a kind of development that is both sustainable and equitable.”10 Nordhaus and Shellenberger are imposing a fantasy on reality here, and it is given away when they say that the WTO, World Bank, and IMF will not be reformed to protect the global environment—but simply that they are choosing to see these institutions in that light.

In Break Through, Nordhaus and Shellenberger acknowledge that successfully arresting climate change will require equalizing per capita emissions across the globe. They then come to the realization that this will in effect mean equalizing living standards. But this cannot be a levelling down, they declare; it must be a levelling up, bringing the developing world up to the standards of America. Before one can even begin wondering whether there are enough natural resources to support such levels of consumption, they suddenly redefine economic wealth as immaterial well-being: “The new vision of prosperity will not be the vision of economic growth held by those who worship at the altar of the market. It will define growth not in gross economic terms but as overall well-being.”11 It is as though they themselves realize that endless growth is both impossible and undesired. The question is: If selecting well-being over economic growth is good enough for a future world, with its equalized carbon emissions and new vision of prosperity, why can it not be adopted today?

Conclusion: Calling Out Crackpot Realism

The supposed trump card of Nordhaus and Shellenberger, and all such progressive environmentalists, is their purported realism. In practice this is simple conformity with the interests of the dominant economic and political power structures of the day. This means acceding to the related imperatives of financialized capitalism: accepting that both opportunities for growth be continually expanded, and that the self-identification of the electorate as materialistic consumers be fostered and pandered to—even if that means occluding the grounds for collective action.

It is in these terms that they attempt to redefine environmentalism, and in the process disparage the efforts of all environmentalists whose arguments pose uncomfortable challenges to the status quo. They characterize all who are not with them as utopians, for them the ultimate in damning with faint praise. Mixed into the realism of the progressive environmentalist is a love of power. It stands to reason, they believe, that anyone who does not work within the terms set by the powerful will never share in power, and is therefore a fool. They regard the green movement as a whole precisely as the wider New Democrat/New Labour mentality regards the left as a whole: well-meaning, woolly, oppositionalist, self-indulgent, self-defeating, and pathetic. Ideologically pure the others may be; yet if they sincerely cared about the interests they said they were fighting for, they ought to fall into line, however much they might detest it, behind the realists who might actually wield some practical influence. There is no alternative.

At other times less crude versions of this doctrine, especially ones which promised real hope of reforming the system from within and of gaining power to change power, have had much to recommend them; this is the foundation for the historic successes of social democracy. But things are different now. Above all, in this context, environmental limits preclude continuation of the status quo. Progressive environmentalists pride themselves on their realism and in being intimates of the power structures of the present. However, those same structures are doomed to collapse, and belief in them is only sustained by denial, so this realism is in fact the very height of fantasy—“crackpot realism,” to adapt the phrase C. Wright Mills used to describe the mentality of the Cold War.12

The strategy for those who wish to reply to Nordhaus and Shellenberger and to marginalize them as spokesmen for the environmental movement ought to be clear—turn the tables on them by emphasizing the self-contradictions, simplistic fantasy, and the sheer insubstantiality of their thought. And to emphasize the important fact: it is too late to play games.

Notes

1.              ↩ For an excellent recent analysis of the legacy of New Labour, see Robin Archer, “Leading Labour,” Renewal 19, no. 1 (2011), http://www.renewal.org.uk.

2.             ↩ Ted Nordhaus, Michael Shellenberger, and Jesse Jenkins, “Energy Emergence: Rebound and Backfire as Emergent Phenomena,” Breakthrough Institute, February 2011, http://thebreakthrough.org.

3.             ↩ Ted Nordhaus and Michael Shellenberger, Break Through: Why We Can’t Leave Saving the Planet to Environmentalists (New York: Mariner, 2009), 126: “We may achieve some greenhouse gas emission reductions by lowering our overall consumption, but the largest reductions will come from energy efficiency and shifting to cleaner energy sources—strategies that don’t require drastic changes to the way we live our lives.”

4.             ↩ Ted Nordhaus and Michael Shellenberger, “Founders’ Statement on ‘Energy Emergence’ Report,” February 17, 2011, http://thebreakthrough.org.

5.              ↩ Nordhaus, et. al.,“Energy Emergence,” 54.

6.             ↩ Nordhaus and Shellenberger, Break Through, 6-7.

7.              ↩ Paul Ekins, Economic Growth and Environmental Sustainability—The Prospects for Green Growth (London: Routledge, 2000), 182.

8.             ↩ Ibid., 184, 193.

9.             ↩ Ibid., 46.

10.           ↩ Nordhaus and Shellenberger, Break Through, 271.

11.            ↩ Ibid., 269–70.

↩ C. Wright Mills, The Causes of World War III (New York: Simon and Schuster, 1958), chapter 13.