Green ganes

Green Games

Why we don’t seem to care about global warming

By Nick Louth                                              Jan 2007

We’ve all had the experience when dining out with a large group that crazy amounts of food are ordered, prodigious amounts of wine drunk and the more abstemious members of the party are horrified when the shared bill finally arrives.

This kind of group behaviour, unfortunately, also governs the way we look after the world’s resources and environment.

But I only ordered the soup…

A meal like this is a shared resource. It makes ‘sense’ to be selfish and guzzle all you can because others will share any extra cost, while those who eat and drink modestly will still get the same bill. It applies pretty well to shared water resources, fisheries, oil, endangered species conservation and global carbon emissions.

The Stern report on climate change late last year warned that immediate action was needed to cut global carbon emissions in order to forestall huge and irreversible climatic changes. Unlike many such apocalyptic warnings, the report also came with an economic analysis to justify the sacrifices required. Give up a small part of economic growth today, Sir Nicholas Stern said, to avoid suffering major economic damage in a few decades time.

The Blair agenda

You would have thought that in a rational world, we would all wake up and take notice. But no, the world goes on as much as before. No country wants to jeopardise economic growth and its electoral chances unless it is sure that it will not be acting alone. 

Even British Prime Minister Tony Blair, supposedly committed to radical action on climate change, said this month that he did not think any government would ever curtail cheap flights or impose draconian extra costs on motoring.

Likewise, back in the restaurant, we really don’t want to see the bill balloon beyond our collective means, but having just seen Samantha from accounts ordered the lobster starter, then I’m certainly going to get to order an extra side dish and a glass of vintage port at the end.

Game theory

This collection of psychological incentives makes up what economists call game theory. In game theory, individuals make choices to suit themselves based on their expectations of the actions of others. We expect others to be self-centred and we are rarely disappointed. Game theory describes the conduct of games like chess, Risk and Diplomacy pretty well. Not surprisingly it also comes nearest to describing war and politics.

Game theory makes it particularly hard for individuals to do what is best for a group as a whole. Ethical behaviour produces the best individual outcomes only in two situations. One is where everybody trusts each other implicitly, exemplified by the romantic meal for two where you wouldn’t dream of upsetting the other player. Clearly such trust is rare in international agreements.

The other is where each player pays only the bill for what they consumed themselves. That is where a resource, such as fish stocks, water or a rain forest is under the tight control of an individual organisation or country. 

The fishing game

Nothing better illustrates the chaos of a large mistrustful group than EU fishing policy.  The EU tries to act as referee in the control of this dwindling resource through a wide variety of controls:

·        Forced retirement of fleet capacity

·        No-take or seasonally closed fishing areas

·        Minimum size of fish allowed to be landed by species

·        Gear type and net size restrictions

·        Number of days at sea per vessel

·        Over-arching total allowable catch limits by species per country

All these restrictions are at least partially effective, but they still do not change the incentives for countries, for regional fishing industries and  boat owners. These incentives are to hang on to their historic share of the catch and ultimately to cheat. While actual cheating is probably not as common as imagined, the expectation of cheating it by other players is rife and undermines commitment to the rules. The larger the group, the more this is so.

The happiness of the solitary diner

Now lets travel to Iceland and Norway. These are, if you like, solitary diners who control their own fish stocks with 200 mile limits, and within which foreign trawlers are not allowed.

Not surprisingly, the fish stocks in these areas are healthy. Cod, a species so depleted in the North Sea that they are often little more than the size of sardines, are in Norwegian waters frequently found at a metre or more in length and weighing well over 30kg.

How can they do this? The answer, as marine biologist Bryce Deukars-Stewart puts it, is this: “Ownership breeds stewardship.”   

It is almost impossible for the EU to reach a situation like that enjoyed by Norway and Iceland. The 27-member union is made up of members who have large coastlines, and those which like the Czech republic and Hungary which have none. Fish move around freely, and policing can be difficult. While it would probably make sense for Britain to leave the EU fishing regime and “do an Iceland” by creating a 200 mile limit, the diplomatic repurcussions would be severe.

Cheating by experts

For cheating over shared resources, you cannot get a better example than OPEC, which groups the producers of most of the world’s oil. In OPEC’s case the shared resource is not the oil per se, but the oil price. This needs a little explaining.

The higher the oil price, the more money each OPEC member state makes for its crude production. To get a higher oil price, you need to cut production, which is what the organisation announced it would do in November, and may do again in February. With demand growing gradually, any cut in supplies should lead to higher or at least stable prices given that non-OPEC suppliers cannot easily change output.

However, the optimum game theory strategy for OPEC members individually is to sign up to production cuts and then cheat by exceeding their allocated output quota. That way cheaters get the higher price prevailing in the market, without actually having cut the number of barrels they earn it on.

Caught out by prices

Oil market analysts say that while OPEC claims to have cut production by 1m barrels per day, only 700,000m bpd has actually been cut. While countries like Nigeria, accused of being a serial cheater in output, may not get formally caught, the results of cheating show up in softer than expected oil prices. Those that don’t cheat, like abstemious diners in a large group, do not get the benefits of their moderation.    

The shared resource model governs water resources too. Farmers tap rivers or acquifers in arid areas to boost crop yields by irrigation. Individually, the action makes sense, but collectively it can be a disaster.

The Aral Sea

The Aral Sea, between Kazakhstan and Uzbekhistan in central Asia used to be the fourth largest body of fresh water in the world. However, since 1920 its level has dropped by about half a meter a year, and it is now just 25% of its original size. Its thousands of unique fish species and the birds that depend on them are threatened not only by the loss of water but by pollution and increased salinity.

The Aral Sea is a Soviet era problem, while the Ogallala is an American one. This gigantic water-laden acquifer essentially lies under the entire mid-west from South Dakota, through Nebraska, Kansas and Colorado to Texas. It took millions of years to accumulate, but drilling by farmers who use it for irrigation is rapidly draining it. The level is dropping by around a couple of feet a year. No-ones knows how much is left.

The same thing is happening in Mexico, Australia, Iran, Saudi Arabia and China. Acquifers which have built up rainfall since the days of the dinosaurs are being emptied in a geological blink of an eye. Wheat and cotton crops which depend on them will fail unless alternative sources are found.

The cruellest twist    

There is one final cruel twist that economics and game theory bestows on shared resources. When things begin to turn bad, and the resource dwindles, its value soars and its chance of surviving diminishes. While in the restaurant, few diners would be quite rude enough to snatch the last glass of wine under the eyes of others, it is different when you are not detected.

The best illustrations are trades in endangered species. Rhino horn daggers, prized in the Arab world, and the supposed aphrodisiac qualities of rhino horn in the Far East are the reason that wild rhinos have been hunted almost to extinction.

Kill now, while stocks last

The fewer rhinos there are left, the more the value of the horn and the greater the incentive for dealers to pay poachers to get some while it is still available. This produces an investment demand, to stockpile in advance of expected price rises which then prove self-fulfilling.

While all this sounds horribly depressing, it doesn’t have to be. The answers are quite simply to build incentives to sustain resources rather than rules to hinder the way we abuse them.

The EU in recent years has improved its fishing policy by developing regional advisory committees which are a kind of users’ group for particular areas of the sea. By making the fishermen as near as possible into custodians, they harness the desire to build a sustainable future.

Strong multilateral bodies needed

And what of the environment? International co-operation showed that it could get things done in the 1990s with the global elimination of the CFC gases which were thinning the ozone layer. This was a huge achievement, involving corordinated changes in industrial processes across the world, and the ozone layer is now recovering.

Doing the same with carbon emissions will be much tougher, but

It will require powerful multilateral bodies to make it work. The EU’s European emissions trading scheme is a good start, because it puts a price on emissions, but a worldwide expansion is badly needed.

We need to act fast. When it comes to global warming, we have gorged ourselves silly, and are already on the dessert. But the bill is coming up, fast.

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