Economic Advice for the Planet

Road to Copenhagen / by Maywa Montenegro /

Protecting the environment, some say, is a drag on economic growth. Kristen Sheeran directs a new network of economists who aim to prove them wrong.

Four years ago in Santa Monica, California, a group of economists, philanthropists, and NGO representatives gathered to discuss the state of the environmental movement. What they found was that while environmental advocates were able to make arguments on scientific and legal grounds, they were missing the third leg of the stool: economics. As more and more environmental decisions were being made on the basis of economics, this expert gap was turning into a severe hindrance. The idea born that day, says economist Kristen Sheeran, was to create a nation-wide network of economists with expertise in environmental issues who could interact with media, policymakers, business leaders, and the general public. The Economics for Equity and the Environment Network—the E3 Network—was launched, and not long after Sheeran left her academic position to become its executive director. She recently spoke with Seed editor Maywa Montenegro about the benefits of a networked think tank, the carbon footprints of US cities, and what’s on tap for Copenhagen.

Seed: What kind of help does the E3 Network provide?
We’ve got more than 100 economists in the network who have expertise in a whole wide range of enviromental issues, from fisheries to forest to climate. So depending on who’s asking for help, we work in a variety of ways: consulting, advising, giving testimony before Congress, doing research on the issues people need clarity on.

Seed: What makes this different from a traditional think tank?
If we modeled ourselves as an environmental think tank, we’d be doing a lot of in-house research and publishing under a brand name. But we see ourselves as an organizer and a catalyst for research. Almost everyone in the network has a “day job”—many are academics, some work for think tanks, some have government positions. We thought our economists would have more of an impact if they represented different institutions across the country, whereas think tanks tend to become associated with a particular ideological bent—“Of course they said that, that’s the American Enterprise Institute.” With the network, we’re bringing 100 different economists to bear on different issues. And they don’t always agree.

Seed: E3 has recently launched a website called What was the impetus for this project?
In climate policy circles, the climate skeptics have been more or less replaced with the economic skeptics. They basically argue that if we move too quickly, it will be devastating to the US economy. Since the debate had shifted from the science to the economics, we wanted to demonstrate that the economics shouldn’t be used as the cause for inaction on the climate front. On the contrary, there’s a tremendous amount of economic evidence—peer-reviewed, so it’s not quackery—that shows that we can take proactive steps to mitigate our emissions in ways that do not devastate the economy. is a compilation of all the peer-review studies with conclusions that support immediate policy measures to combat climate change. We wanted to show the weight of evidence that supports aggressive mitigation.

The version of RealClimateEconomics that’s online now is only the beginning. We’ll be adding a live commentary feature where economists will be adding commentary on a weekly basis on what’s happening in the climate policy debate. Let’s say a new report is published or the Waxman-Markey bill comes out. What’s the economist’s take on that?

Seed: You’ve said that economics should reflect the best available science. Ecological economists like Herman Daly and Robert Costanza have been working in this vein for decades.
We definitely see ourselves as standing on the shoulders of people like Daly and Costanza. And many of the economists in E3, though not all, would self-identify as ecological economists. But one of the potential shortcomings we saw in the ecological economics movement, particularly here in the US, is that it failed to translate into direct action. So we created E3 with the vision of an engaged and applied economics that can be useful for solving real-world environmental problems.

Seed: Now that the US seems to be moving towards a national climate policy, what issues will emerge as most critical?
One of the important questions being raised is: What are going to be the differential impacts on states? Is this going to affect people in some parts of the country much more than in others?

A couple of weeks ago E3 published a report that looked at where emissions are greatest in the country as compared to the national average. We tried to take a first stab at understanding why the discrepancies exist. Are there things that are happening in the states with lower per capita emissions that could potentially be replicated in the states with higher than average emissions?

Seed: And what did you find?
What really jumped out at us was that several states—New York, California, Oregon, Rhode Island, Washington—have per capita emissions that are roughly one half of the US mean. These are US states with an “American lifestyle” doing much better than their average counterparts elsewhere in the country.

So many Americans are concerned right now that if we take significant steps to reduce our carbon footprint, we’re going to somehow compromise our quality of life. But if we look in our own backyards, we see these counterexamples. Nobody talks about the poor people in California or New York using candles or freezing through the winter. Per capita emissions in those states are roughly equivalent to per capita emissions in places like Germany, Japan, and Belgium.

Seed: Is the differential mostly a matter of urban versus rural?
If we look at transportation emissions, not surprisingly, the percentage of the population that lives in urban areas matters a lot; population density matters a lot. But other things matter too—things like gas prices, which are influenced by state taxes on gasoline, and the percentage of the population that uses public transportation. So yes, there are arguably some factors that are beyond states’ control—Wyoming is never going to have the population density of New York—but there are factors, like gas prices and public transportation options, that states can control. Even the rural/urban divide isn’t so clear cut. Vermont, for instance, which is very rural, has one of the lowest per capita emissions in the country.

This kind of study is an obvious first step in thinking about how the nation as a whole could meet its emissions targets, looking at what’s working in some parts of the country and trying to replicate those examples as best as possible.

Seed: Is there any sort of consensus among your experts as to the effects of cap-and-trade legislation?
There are two important things that are going to come out of this legislation. The first is a cap. Assuming it’s a firm cap, the cap gets us on a trajectory towards stabilizing carbon emissions. The second thing, which as economists we talk a lot about, is that it’s going to put a price on carbon emissions. Today, absent any legislation, carbon emissions are implicitly priced at zero. As economists, we find this is extremely problematic because markets work best when prices are accurate, i.e., prices have to reflect what the real cost of using a particular good or resource is. To say that carbon emissions are priced at zero is to say that markets have gotten the price of carbon terribly wrong throughout history. To put a price on carbon is to change the game in a whole new way.

Seed: What keeps you up at night right now?
KS: A big initiative we hope to launch sometime in early fall: the Economics of 350. It’s another example of how we are taking our cues from the scientists. More and more members of the scientific community have come out and said that to really avoid the worst of climate damages we need to stabilize at 350 parts per million. Most US legislation at this point is stumbling over 450 ppm or at best 400 ppm, so 350 is really a stretch. Our analysis is for the decision makers and advocates at the global climate change negotiations in Copenhagen in December. We wanted to put together an economic growth map of what it would take for the US economy to get itself on track for a 350ppm target. Not because it’s politically feasible right now in the US—that’s not for us to answer—but because the scientists have issued that challenge that this is what we need to do. We want to empower those going to Copenhagen with economic answers for what the global community is going to be asking them.

Originally published June 17, 2009

Tags carbon economics environment policy

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