[R-G] [BillTottenWeblog] An Exchange of Souls

[Bill Totten]

As government documents show, Sir Nicholas Stern accidentally launched a
trade in human lives.

by George Monbiot

Published in the Guardian (February 19 2007)


This is a column about how good intentions can run amok. It tells the
story of how an honourable, intelligent man set out to avert
environmental disaster and ended up accidentally promoting the economics
of the slave trade. It shows how human lives can be priced and exchanged
for goods and services.

The story begins in a village a few miles to the west of London. The
British government proposes to flatten Sipson in order to build a third
runway for Heathrow airport. The public consultation is about to end,
but no one doubts that the government has made up its mind.

Its central case is that the economic benefits of building a third
runway outweigh the economic costs. The extra capacity, the government
says, will deliver a net benefit to the UK economy of GBP 5 billion {1}.
The climate change the runway will cause costs GBP 4.8 billion {2}, but
this is dwarfed by the profits to be made.

There is plenty of evidence suggesting that the government's numbers are
wrong. A new analysis by the environmental consultancy CE Delft shows
that the official figures overestimate both the number of jobs the
runway will generate and the value brought to the United Kingdom by
extra business passengers {3}. In an excoriating article in the Guardian
last week, Professor Paul Ekins demonstrated that the government has
rigged the cost of carbon {4}. (Delightfully, the web address for the
consultation document ends completecondoc.pdf.) But while the runway's
opponents don't like the results, most people seem to agree that
weighing up economic costs and benefits is a sensible method of making
this decision. The problem, they argue, is that the wrong figures have
been used.

When Sir Nicholas Stern published his study of the economics of climate
change, environmentalists (myself included) lined up to applaud him: he
had given us the answer we wanted. He showed that stopping runaway
climate change would cost less than failing to prevent it. But because
his report was so long, few people bothered to find out how he had
achieved this result. It took me a while, but by the time I reached the
end I was horrified.

On one side of Stern's equation are the costs of investing in new
technologies (or not investing in old ones) to prevent greenhouse gas
emissions from rising above a certain level. These can reasonably be
priced in pounds or dollars. On the other side are the costs of climate
change. Some of them - such as higher food prices and the expense of
building sea walls - are financial, but most take the form of costs
which are generally seen as incalculable: the destruction of ecosystems
and human communities; the displacement of people from their homes;
disease and death. All these costs are thrown together by Sir Nicholas
with a formula he calls "equivalent to a reduction in consumption", to
which he then attaches a price.

Stern explains that this "consumption" involves not just the consumption
of goods we might buy from the supermarket, but also of "education,
health and the environment."{5} He admits that this formula "raises
profound difficulties", especially the "challenge of expressing health
{including mortality} and environmental quality in terms of income"{6}.
But he uses it anyway, and discovers that the global disaster which
would be unleashed by a 5-6° rise in temperature, and which is likely to
involve widespread famine, is "equivalent to a reduction in consumption"
of 5-20%.

It is true that as people begin to starve they will consume less. When
they die they cease to consume altogether. But Stern's unit {a reduction
in consumption} incorporates everything from the price of baked beans to
the pain of bereavement. He then translates it into a "social cost of
carbon", measured in dollars. He has, in other words, put a price on
human life. Worse still, he has ensured that this price is buried among
the other prices: when you read that the "social cost of carbon" is $30
a tonne, you don't know - unless you unpick the whole report and its
methodology and sources - how much of this is made of human lives.

The poorer people are, the cheaper their lives become. "For example",
Stern observes, "a very poor person may not be ‘willing-to-pay' very
much money to insure her life, whereas a rich person may be prepared to
pay a very large sum. Can it be right to conclude that a poor person's
life or health is therefore less valuable?"{7} Up to a point, yes:
income, he says, should be one of the measures used to determine the
social cost of carbon. Sir Nicholas was by no means the first to use
such a formula. What was new was the unthinking enthusiasm with which
his approach was greeted.

Stern's methodology has a disastrous consequence, unintended but surely
obvious. His report shows that the dollar losses of failing to prevent a
high degree of global warming outweigh the dollar savings arising from
not taking action. It therefore makes economic sense to try to stop
runaway climate change. But what if the result had been different? What
if he had discovered that the profits to be made from burning more
fossil fuels exceeded the social cost of carbon? We would then find that
it makes economic sense to kill people.

This is what the government has done. Its consultation paper boasts that
"our approach is entirely consistent with the Stern Review"{8}. It has
translated his "social cost of carbon" into a "shadow price of carbon",
which is currently valued, human lives and all, at GBP 25 a tonne {9}.

Against this is set the economic benefit of a new runway. Part of this
benefit takes the form of shorter waiting times for passengers. The
government claims that building a third runway will reduce delays, on
average, by three minutes {10}. This saving is costed at 38-49 Euros per
passenger per hour {11}. The price is a function of the average net
wages of travellers: the more you earn, the more the delays are deemed
to cost you, even if you are on holiday.

Consider the implications. On one side of the equation human life is
being costed. On the other side, the value of delays to passengers is
being priced, and it rises according to their wealth. Convenience is
weighed against human life. The richer you are, the more lives your time
is worth.

The people most likely to be killed by climate change do not live in
this country. Most of them live in Africa and South Asia. Hardly any of
the economic benefits of expanding Heathrow accrue to them. Yet the
government has calculated the economic benefits to the United Kingdom,
weighed them against the global costs of climate change and discovered
that sacrificing foreigners - especially poor ones - is a sensible
economic decision.

I can accept that a unit of measurement which allows us to compare the
human costs of different spending decisions is a useful tool. What I
cannot accept is that it should be scrambled up with the price of eggs
and prefixed with a dollar sign. Human life is not a commodity. It
cannot be traded against profits or exchanged for convenience. We have
no right to decide that others should die to make us richer.

www.monbiot.com

References:

1. The net benefits are estimated at between GBP 4.4 billion and GBP 5.2
billion: Department for Transport, November 2007. Adding Capacity at
Heathrow Airport: Consultation Document, page 74.

2. Department for Transport, November 2007. Adding Capacity at Heathrow
Airport: Consultation Document, page 125.
http://www.dft.gov.uk/162259/165220/302152/completecondoc.pdf

3. Bart Boon et al, February 2008. The economics of Heathrow expansion:
Final report. CE Delft.
http://www.hacan.org.uk/resources/reports/4504.final.report.pdf

4. Paul Ekins, 13th February 2008. Path of least resistance. The Guardian.

5. Sir Nicholas Stern, October 2006. The Economics of Climate Change. HM
Treasury, Part 1, page 28.
http://www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/stern_review_report.cfm

6. ibid, Part 1, page 30.

7. ibid, Part 1, page 30-31.

8. Department for Transport, ibid, p10.

9. Department for Environment, Food and Rural Affairs, December 2007.
The Social Cost Of Carbon And The Shadow Price Of Carbon: What They Are,
And How To Use Them In Economic Appraisal In The UK.
http://www.defra.gov.uk/environment/climatechange/research/carboncost/pdf/background.pdf

10. Department for Transport, November 2007. UK Air Passenger Demand and
CO2 Forecasts, page 128.
http://www.dft.gov.uk/pgr/aviation/environmentalissues/ukairdemandandco2forecasts/airpassdemandfullreport.pdf

11. Finding the figures on which the government based its benefit
estimates was a struggle. The consultation document led me to the
passenger demand forecast (see note 10), which in turn referenced this
paper:

European Organisation for the Safety of Air Navigation, 2005. Standard
Inputs for EUROCONTROL Cost Benefit Analyses.
http://www.eurocontrol.int/eatm/gallery/content/public/library/CBA-standard-values.pdf


http://www.monbiot.com/archives/2008/02/19/an-exchange-of-souls/

TO POST A COMMENT, OR TO READ COMMENTS POSTED BY OTHERS, please click
on the word "comment" highlighted at the end of the version of this
essay posted at http://billtotten.blogspot.com/