Book review: ‘Climate Liberalism’ edited by Jonathan Adler

“The conventional approach to environmental problems has been to adopt administrative regulations.” What if there is another way?

‘Climate liberalism’ in Adler’s words examines “the extent to which classical-liberal principles, including an emphasis on property rights, decentralized authority, and dynamic markets, can inform policy approaches to large-scale pollution problems, including climate change”.

Contributors to the book represent multiple academic disciplines and perspectives and while “some would consider themselves to be classical liberals… others would not”.

This may honour classical liberalism’s even-handedness, but it does mean the first hundred pages, including Daniel Cole’s essay ‘Do Libertarians Have Anything Useful to Contribute to Climate Change Policy?’ left me thinking ‘probably not’.

As Cole succinctly puts it: “The practical difficulties of libertarian climate policy include: (1) the global nature of the climate problem, which creates collective-action problems… (2) intractable impediments to international, as well as domestic, climate tort litigation; and (3) the dubious track record of regulatory tools some libertarians prefer, such as cap-and-trade.”

Moreover, in ‘Libertarianism, Pollution, and the Limits of Court’, D. C. Shahar observes that in the he context of controlling pollution, “libertarians have typically disdained legislation and regulation in favour of private efforts and court adjudication” but ,he concludes, this attitude is misguided.

While Catherine Sharkey in ‘Common Law Tort as a Transitional Regulatory Regime’, offers a new perspective on climate change litigation that new legal strategies may emerge “but it is not entirely clear how that translates into tort as an engine as discovery for how to address and/or adapt to climate change harms.”

At this point I felt like giving up. But then comes a series of genuinely liberal and genuinely challenging perspectives.

Climate change and class actions

Brian Fitzpatrick makes two powerful arguments for class actions. One is better incentives – “most class action lawyers work on ‘contingency’: they only get paid if they win and the more they win, the more they get paid.”

The other argument is more independence – “government enforcers are beset by the distractions of special interest campaign money, lobbying, and the revolving door just as much as other government officials”. Indeed, government enforcers may be the government officials most affected by this crony capitalism. Businesses have every incentive to influence the government to look the other way when they do something wrong.

This was a very interesting argument, and one that brought numerous examples to mind – not least Thames Water in the UK.

Industrial ecology

Adler himself writes on the possible role of “firm-like structures that have evolved in other contexts”.

In this regard he eulogises the Anglers Cooperative Association in England, and argues: “An ACA-like entity, structured as a cooperative or condominium association, based in a given watershed or ecological area, could not only represent the interests of individual members, but represent their collective interest in the local resource as well.”

Rejecting sole reliance on initiatives by government, Adler also praises the development of “industrial ecology” where firms discover “a way to make a waste product or potential source of pollution a valuable factor input for another element of production”.

He cites Denmark’s Kalundborg development which was not planned but “evolved over time”. Apparently, the Asnæs power company supplies residual steam to a Statoil refinery in exchange receiving refinery gas that used to be flared as waste. It sends excess steam to a fish farm, and to a district heating system serving some 3,500 homes. Sludge from the fish farm becomes fertiliser for nearby farms, while gypsum produced by the power plant’s desulfurisation process goes to produce gypsum wallboard.

It’s all known as Kalundborg Symbiosis, and frankly we could do with more of it.

Advanced Risk Transfer Mechanisms (ARTMs)

Andrew Moriss’s exploration of insurance solutions is also very thought-provoking. He argues “ARTMs including captive insurance, insurance-linked securities, and insurance derivatives can contribute to addressing the problems by encouraging dynamic, adaptive responses to risk and uncertainty”.

He admits climate modelling is hard ,especially given the scale of the problem – a hundred million Americans will be affected if the Gulf Stream is significantly disrupted. But “just because problems are hard does not mean they cannot be addressed by developing new techniques and data”.

He is particularly interested on the development of catastrophe bonds, “one of the reinsurance industry’s greatest recent innovations.”

In the end I came away agreeing with Ed Dolan. “Putting all this together, the conclusion is that neither government action nor the spontaneous operation of free markets alone is sufficient for an effective response to the climate challenge. Both must work together.”