Gaslighting Intergenerational Equity

What Policy Choices Reveal About the Social Discount Preferences of the Climate Movement

For many years, it has been a standard claim of the climate movement that the issue is centrally one of intergenerational equity. Current generations owe it to future generations to cut emissions quickly, in order to assure a livable climate for those who come after. Taking more than our fair share of the Earth’s bounty, in the form of dumping carbon pollution into an atmosphere that can only absorb so much without producing dangerous warming for future generations, is immoral and inequitable.

This is uniquely the case when it comes to climate change because while carbon pollution may not be forever, it lasts a really long time in the atmosphere. Every additional molecule of carbon dioxide will incrementally warm the atmosphere for a thousand years. So carbon produced through the combustion of fossil fuels today will warm the atmosphere for a millennium, potentially producing long lasting costs for many future generations of humans on the planet.

How to balance these tradeoffs, between current benefits and future costs associated with burning fossil fuels, is expressed in formal economic terms as the social discount rate. Assuming some level of continuing economic growth, a dollar spent today is worth more to society than a dollar spent next week or next year or next century. Future generations will be richer than people are today, and hence better able to afford the economic costs that climate change will impose upon them. So how much people who are poorer today should pay to reduce the cost of climate impacts in the future depends, on the one hand, upon how much future economic growth one expects and, on the other, how costly one expects future climate impacts to be.

Traditionally, standard economic modeling simply looked at various savings and investment decisions being made by households and firms and calculated an implied discount rate from those behaviors—how much current consumption were those actors willing to forego today in order to save or invest money to realize future economic benefits or avoid future economic costs. The wisdom of the crowd, in this view, was probably roughly correct, or at least more likely to be correct than any estimate that any individual or discrete party was likely to come up with in the alternative. This was the approach that my uncle, William Nordhaus, applied when he pioneered the economic modeling of climate change in the early 1990s.

That’s where things got complicated. Applying standard economic approaches to social discounting typically produced results suggesting that the world shouldn’t spend very much money today to mitigate future climate change. A discount rate of, say, 3%, applied over many decades or centuries heavily discounts future costs, even if those costs in absolute terms are very large. Environmentalists, who believed that far reaching action was urgently needed to mitigate climate change, were not happy with this result.

The problem was not solely due to the choice of discount rate. There was also the question of how future warming would translate into economic damages. But the two questions are actually difficult to disentangle. A discount rate can be intuited from current financial behavior of various actors in the present economy. But it is ultimately a behavioral preference that reflects expectations for the future. So the social discount rate as applied to economic modeling around a question like climate change is hard to separate from the question of how much we expect a given amount of future warming to affect future economic growth.

In 2007, that question burst into broader public consciousness with the publication of the Stern Report, a UK government publication produced for the Chancellor of the Exchequer by Nicolas Stern, which argued that intergenerational equity justified a discount rate of close to zero for assessing how much cost governments should impose on present day consumption to avoid future climate impacts, meaning that governments should be willing to spend very close to a dollar today to avoid a dollar of future costs associated with climate change, even for impacts that would not occur for many decades. That provoked a series of debates, first between my uncle and Stern, and then with the economist Martin Weitzman, about the appropriate approach to discount rates in climate economics.

I’ll forgo a blow by blow account of the substance of those debates. But suffice to say that among environmental partisans, Stern and Weitzman’s arguments for lower discount rates predictably carried the day. Carbon dioxide has a thousand year residency in the atmosphere, assuring a hotter climate for many hundreds of years, hence emitting it into the atmosphere in pursuit of economic gains today risks creating economic cost and misery for many, many future generations. QED.

It was easy enough for environmentalists to agree in the abstract that society should not discount the future costs of climate change very much, if at all. But when the question has been about how to calculate the social cost of carbon, applying that principle consistently to a variety of real world climate policy questions has been a different matter. Green partisans, for instance, use market based discount rates in discussions of the relative cost of low carbon technologies because doing so advantages technologies like solar and wind which, compared with nuclear power, have lower upfront capital costs but also only produce power for 20 to 30 years. A low social discount rate, by contrast, dramatically improves the economics of nuclear power plants, which have higher capital costs but are long-lived low carbon infrastructure that can produce energy for 80 years or longer.

But by far the most extreme case of talking low discount rates in theory while advocating for high discount rates in practice has been the analytical sleight of hand that environmental opponents of natural gas have used in order to claim that it is as bad for the climate as coal, which has turned the social discounting preferences of climate advocates completely on their head.

Once upon a time, climate advocates viewed natural gas as relatively benign. It emitted about half the carbon dioxide as coal and was relatively scarce and expensive. Then the shale revolution happened and it got a lot cheaper and more available. The new hydraulic fracturing technologies also made it possible to produce gas in places like upstate New York and the Colorado front range, where there hadn’t been much fossil energy production for many decades and which also happened to be the backyards of a lot of environmentalists.

Over the course of just a few years, environmental opinion about natural gas flipped. It was now, environmental opponents claimed, every bit as dangerous for the climate as the coal fired electricity generation that it was rapidly displacing.

The basis for this claim was that methane leakage from natural gas wells and distribution infrastructure canceled out the lower carbon emissions associated with natural gas. A then obscure Cornell University environmental scientist named Robert Howarth, with funding from an upstate New York foundation, called the Park Foundation, produced a series of studies claiming that methane leakage from natural gas wells was far higher than EPA and industry estimates had theretofore suggested.

Since then, researchers have produced dueling estimates of methane leakage rates. Depending on where you look, what you look at, and what data collection methods you use, methane leakage from natural gas infrastructure ranges from as low as 1.5% to as high as 9% in some production regions. But even at the higher end of that range of estimates, the claim that natural gas was as bad as coal required a critical methodological sleight of hand. Howarth and those who would follow and amplify his claims used a very short period of time, 20 years (versus 100 years that had long been the standard) to calculate the relative warming impact of methane and carbon dioxide.

The reason that this matters is that while methane is a very powerful greenhouse gas, it stays in the atmosphere for less than 20 years, then breaks down into a residual carbon dioxide molecule. It can’t accumulate in the atmosphere in the same way that carbon dioxide does and the residual contribution to carbon dioxide accumulation is insignificant because the total amount of anthropogenic methane emissions is vastly smaller by volume than carbon dioxide emissions are.

So while using 20 year warming instead of 100 year warming has been a convenient way for opponents of natural gas to inflate the impact that natural gas has on the warming of the planet, it also makes a mockery of the notion that climate change is centrally an issue of intergenerational equity. We care about carbon dioxide emissions precisely because it resides in the atmosphere for a very long time. Hence, as long as human societies continue to emit carbon dioxide at any significant level, it will continue to accumulate and will affect the climate. And even after we stop emitting it entirely, the carbon we’ve already emitted will stay in the atmosphere and affect the future climate for many hundreds of years.

Methane, by contrast, doesn’t work this way. We don’t emit that much of it and its warming impact is very short term and transitory. Today’s methane emissions simply can’t significantly affect the climate that future generations will inherit because, except for the very tiny amount of residual carbon dioxide it leaves behind, it is gone from the atmosphere within 20 years. For this reason, when Howarth and others insist that gas is as bad as coal, they are de facto utilizing a very high social discount rate, somewhere north of 10%. Or, in less abstract terms, they are preferring to avoid very short lived methane emissions from natural gas over carbon emissions from coal generation that will remain in the atmosphere for a thousand years.

Many climate advocates insist this is a false choice, that, in fact, they do not prefer coal over gas but rather renewable energy over gas. But were this the case, there would be no reason to use 20 year warming to calculate the climate impact of natural gas. Natural gas is a fossil fuel that emits carbon dioxide when it is combusted and, hence, will always have a much greater warming impact when compared with low carbon alternatives like nuclear or renewables. The only reason to use 20 year warming to calculate its warming impact is to inflate its emissions relative to coal. And the reason that climate advocates do this is because they are quite aware that a lot of gas is displacing coal, not renewables or other lower carbon sources of energy.

And while it is no doubt tempting for many sympathetic to the cause to simply write off the inconsistencies of the climate movement on this subject as a necessary concession to advocacy and campaigning, the growing focus on methane emissions and 20 year warming that has resulted has tilted the focus of climate mitigation away from carbon dioxide and towards methane in ways that go well beyond the tradeoffs between natural gas and coal. Doing so has exactly the consequences one would expect from the application of a high social discount rate to climate policy, pushing the cost of reducing carbon dioxide emissions into the future.

The most recent and newsworthy case of this is the Biden Administration's announcement in January that it was pausing permitting of new natural gas export facilities while it evaluated their climate impact. The basis for doing so was a new, unpublished Howarth analysis claiming that leakage from natural gas export and transport facilities resulted in emissions comparable to burning coal and featuring two hallmarks of all of Howarth’s work—leakage rates higher than anyone else’s estimates and greenhouse gas emissions comparisons calculated using 20 year warming impact. The likely result, should the pause continue, will be to shift the energy mix in Europe and Asia toward coal, as well as gas produced in Russia, Asia, and the Middle East with significantly higher emissions intensity.

But the environmental movement’s turn against natural gas, and concomitant shift of concern toward methane emissions, has warped climate mitigation efforts in other ways as well. Once you decide that methane is a major climate mitigation concern, you can’t just stop with natural gas. About two-thirds of anthropogenic methane emissions come not from fossil fuel use but from biogenic sources in agriculture, a lot of that from enteric methane associated with livestock production. So there are now major efforts also underway to cut methane emissions associated with dairy, beef, and other livestock production.

And while there may ultimately prove to be reasonable steps that can be taken to reduce enteric methane emissions, ill-conceived policies to require emissions mitigation threaten to increase emissions from the sector if they also reduce livestock productivity and increase production costs. The reason for this is that beef is increasingly a globally traded agricultural commodity. Thanks to intensive beef production, beef and dairy production in the US, Europe, and Canada are among the most environmentally efficient in the world. These producers typically get cattle to slaughter weight much faster. They produce much more milk per dairy cow. And they use less land per pound of beef and liter of dairy produced.

These efficiencies translate directly into lower methane and carbon intensity. A steer that gets to market in 18 instead of 34 months produces proportionately less methane during its lifetime. The same is the case for a dairy cow that produces 50% more milk per day. Enteric methane reduction efforts that further reduce emissions without reducing the efficiency of beef and dairy production will reduce emissions. But any policy or technology that reduces emissions at the expense of productivity will generally do the opposite, or at the very least, see significantly diminished benefits. All else equal, a feed additive that cuts methane by 25%, for instance, but that also reduces milk output or increases the time that it takes to get to slaughter weight by a similar proportion won’t achieve any net emissions benefit.

Worse, even if the methane benefit of those interventions is net positive, if it lowers overall productivity or raises prices, it is likely to result in increased livestock production elsewhere, where it is unlikely to be as efficient environmentally. Here is where the high social discount rate implied in overweighting the warming impact of methane versus carbon dioxide really matters. Reducing livestock productivity in the US has a carbon opportunity cost that comes with it, in the form of increasing livestock production in places like Latin America where livestock systems are generally more land intensive and very strongly associated with land use change and deforestation. Shifting production from the US to Brazil or Argentina increases pressure to convert more forest and grassland to pasture, which in turn results in higher carbon emissions from the agriculture sector.

Just as with the trade-off between coal and gas, focusing on reducing domestic emissions of enteric methane without accounting for the consequences of global carbon emissions from the agricultural sector prioritizes very short-term warming over the thing that we actually care about when we work to mitigate climate change, which is the accumulation of greenhouse gasses in the atmosphere that will impact the future climate for many hundreds of years.

Clearly, there are a range of reasonable steps that we can take to reduce methane emissions associated with natural gas, livestock production, and other anthropogenic activities. Natural gas is composed entirely of methane. So cost effective measures to capture fugitive methane from natural gas production and distribution is economically valuable. Many potential technologies to reduce enteric methane emissions, including feed additives and vaccines, similarly promise to increase, rather than decrease, livestock productivity. But these interventions shouldn’t require putting our fingers on the scale through the use of 20 year warming to pencil out.

By contrast, any policy that requires the use of 20 year warming for justification is definitionally applying a very high social discount rate to climate policy tradeoffs and will almost certainly increase carbon emissions, increase long-term warming, and increase economic costs to future generations associated with that warming.

At the end of the day, carbon dioxide is the main event when it comes to climate change. Whether through analytic sleight of hand, carbon offsetting, or emissions trading, and whether advocated by academics like Howarth, greenwashing corporations, or clever policy-makers, anytime advocates propose to place short-lived greenhouse gasses on an equal footing with carbon dioxide, it's a safe bet that the cause of intergenerational equity is being sacrificed at the altar of political or ideological expediency.