Markkula Center of Applied Ethics

Climate Change and Justice Between Generations

By Suruchi Bhutani

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In a recent Ethics at Noon presentation, William Sundstrom, SCU professor of economics, and Keith Warner, member of the Santa Clara Environmental Studies Institute, argued for taking a more proactive approach towards limiting the harmful impact of global warming. Calling it an ethical as well as an economic issue, they asked hard questions about our responsibility to future generations and also discussed an ethical framework for doing a cost benefit analysis.

Warner, who is a director at the Santa Clara Faith Ethics and Vocation Project, questioned the so-called progress made in the last 30-50 years as measured by economic indicators, such as the GNP (Gross National Product). He argued in favor of using a much more holistic indicator, the GPI (Genuine Progress Indicator), which takes into account not only economic progress but also the negative impact of environmental destruction. Per the GPI, Warner said, we have made no significant progress over the past 30-40 years.

He said that we are making economic progress by deriving benefit from the fossil fuels, but we are passing the cost to future generations. According to Warner, the only way to stop this behavior is to make economic decisions in an ethical framework, not in isolation. He recommended the application of a substantive approach to economy where all economical decisions are shaped by moral principles.

Warner also highlighted the widely differing stands taken by the European Union and the US government on supporting measures to restrict the emissions that lead to global warming. Calling this perhaps a “new ethical moment,” he stressed that the European Union has rightfully adopted the philosophy that a special threat of irreversibility comes from destroying ecosystems.

Such a threat, he continued, requires the application of an ethic of precaution. “If something has apocalyptic potential, then we must give that possibility greater weight,” Warner said. This principle is spelled out in the 1992 UN Rio Declaration on Environment and Development, which states, “Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.” He argued that to protect future generations from a possible irreversible catastrophe, drastic steps are required within the United States and the world to control global warming.

Warner supported the idea of developing an economic model for the cost of global warming. To determine the right economic parameters, he suggested looking at similar analysis done 20-30 years ago on nuclear waste disposal.

Warner's remarks were made in response to research by Sundstrom. Sundstrom, chair of the SCU Economics Department, explored the relationship between the economics of climate change the ethics of intergenerational justice. To the extent that we base policy decisions on a cost-benefit analysis of the global warming problem, Sundstrom said, we need to quantify the cost of global warming in the future against the current cost of prevention. While there are some uncertainties about the current cost of prevention, the estimated cost of global warming in the future is a particularly contentious number.

Leading economists in different continents, notably Nicholas Stern in the UK and William Nordhaus in the US, strongly disagree in their estimates of what global warming will cost. According to Sundstrom the disagreement is due to the different discount rates used by the two economists. He explained that discounting is a commonly used technique to calculate the value of a future monetary amount in terms of present-day dollars. The higher the discount rate, the lower the value of a future monetary amount will be in the today’s dollars. Stern assumes a discount rate of 2 percent, which leads to substantial costs for global warming as measured by today’s dollars. On the other hand, Nordhouse uses a rate close to 6 percent, which drives the cost of global warming significantly lower. Sundstrom raised the question of how to pick an ethically defensible discount rate.

To Sundstrom, one way to look at the ethics is to adopt an approach favoring the poor over the rich. He argued that if we make the reasonable assumption that in the future people are going to be richer than they are today, they will have less value for the same amount of money. Hence the cost incurred in the future to deal with global warming should be discounted, when doing the analysis in the present, because people will have more money or spending power in the future and thus more resources to cope with the costs of climate change.

While supporting discounting based on the above approach, Sundstrom strongly disagreed with another justification of discounting, so-called pure time preference, which says that we should intrinsically care more about the wellbeing of present generations, whatever their standard of living, than we do about the wellbeing of those in the future. While Stern has assumed a very low value for pure time preference, Nordhaus has assumed a significantly higher value. Sundstrom argued that to do so is unethical and that the idea of applying pure time preference in social decisions has been widely criticized by many notable economists in history. Finally Sundstrom concluded that we need to be conservative in discounting due to the uncertainties surrounding the analysis of the future.

Both Warner and Sundstrom agreed that the cost of being wrong on global warming is too high a price to pay for humanity and the Earth. They urged the adoption of a unified approach towards managing global warming, one that makes economic sense while at the same time is ethical and moral.

Suruchi Bhutani is a media intern at the Markkula Center for Applied Ethics.

April 2007

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