Oxford Today reports a remarkable talk given to alumni by Oxford's Cameron Hepbern

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Professor Cameron Hepbern spoke at the Oxford Alumni Weekend held in September

In a stark warning leavened by reports of exciting innovation, Oxford’s Cameron Hepbern, Professor of Environmental Economics, told an alumni audience at the recent Oxford Alumni Weekend that we are not on track even to meet the Paris pledge of limiting planetary warming to 3 degrees centigrade – a reference to the Paris climate accord signed by 195 countries in April 2016.

In fact, he noted, in order to even come to terms with that pledge, human CO2 emissions will need to be reduced to nil as early as 2050, a very tall order indeed.

In a wide-ranging talk he noted that the world is not running out of non-renewable resources such as minerals. The irony, he said, is that we’re actually running out of inherently renewable resources such as fish stocks, healthy soils and above all biodiversity, which hovers over all the other issues surrounding environmental sustainability and is too easily overlooked when the debate is typically about climate change and related emissions (below).

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Hepbern’s talk featured a remarkable slide (below) showing how in the past few decades, in what looks almost like a direct riposte to Thomas Malthus, both global population and global wealth have taken off, as if in tandem. English economist and cleric Thomas Malthus (1766-1834) argued that increases in population would eventually diminish the ability of the world to feed itself, but at least in the period since his death, this has not happened.

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In similar fashion, the last century was punctuated by numerous predictions that non-renewable resources such as fossil fuels and minerals resources were about to run out, yet plotted across a graph this never happened, partly because, as Hepbern pointed out, private ownership and pricing mechanisms ensured that these resources were not overconsumed – their price went up, tempering demand while stimulating further discoveries.

The absence of private ownership and efficient pricing mechanisms where fisheries and the atmosphere are concerned, partly explains why they have been plundered indiscriminately. He showed a slide depicting the collapse of cod on America’s Grand Banks. After a long period of steady harvest, yields went vertically upwards for approximately two decades after 1950 as fisherman prospered and their equipment improved, before plunging vertically downwards, right down to no yield at all, the definition of a collapsed fishery.

In a recently-published OUP book National Wealth: What is Missing, Why it Matters (edited by Kirk Hamilton and Cameron Hepburn), Hepburn argues that arresting these declines requires properly accounting for natural capital (including biodiversity as well as  climate change) into new measures of national wealth, which also include measures of human capital and social capital, that capture other human policy areas such as inequality, education and development.

The watchword is no longer merely ‘sustainability’, he says, which can mean many different things, but ‘inclusive green growth’, the word ‘inclusive’ referring to human policy considerations that may have been forgotten before. In short, he says, you can’t just save a forest if you haven’t first considered how the local villagers will cook their dinners. If they currently use wood as fuel, they’ll need a solar powered oven instead.

In a forthcoming chapter in the new Oxford Handbook on Economic Geography, he skewers the Trump argument for ‘dirty growth’, while also rejecting the idea that we can be prosperous without any GDP growth, the argument of some academics, notably Tim Jackson. Hepburn says, ‘the no-growth position is neither necessary nor desirable.’ He argues instead that green growth ‘is almost trivially necessary’. 

By this, he means that he does not support growth for growth’s sake, in what could be described as the traditionally male atmosphere of testosterone-fuelled economists and politicians, but sees it as the inevitable result of a society that comes to its senses and invests massively and comprehensively in green technologies, as fast as possible. Hence ‘trivially’, to mark the fact that growth becomes the byproduct of a greater goal, not the goal itself.

Hepburn explained that ‘weak green growth’ in the global economy implies carbon pricing and some costs to society today, to ensure there is a tomorrow.

Other economists have preferred a ‘strong green growth’ model where there are green subsidies but no other checks and balances – a carrot, no stick approach, which not surprisingly is attractive to politicians.

However the ‘strong green growth’ approach can result in the so-called ‘green paradox’. This is where faced with decline, traditional incumbents, rather than meekly accepting a future of ‘stranded assets’ seek to realise their value as soon as possible while they remain valuable. The proposed flotation of a part of Saudi Aramco is a good example. The Saudi government are seeking to quickly raise money from a fossil fuel asset, but avowedly to invest in non-fossil fuel parts of the Saudi economy. Yet raising the capital from the flotation will also stimulate oil production and shareholders will expect their dividends. 

Hepburn ’s own position on fossil fuels is advisory. Acknowledging the continued innovation in the fossil fuel sector, ranging from shale oil to tar sands, he says such activity ‘provides a justification for the role of government as a long-term planner, especially in infrastructure investment, in order to avoid dirty infrastructure lock-in.’

He means that we need to pursue a green economy as aggressively as possible, but that only strong governments can put in place the legal and economic frameworks required for meaningful change. Their hand at the tiller is the only one that can steer the ship in the right direction, through regulation, enforcement and pricing mechanisms usually linked to taxation or feebate/rebate scenarios in relation to, say, green transport choices.

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Government subsidy as well as the free market and technological advance has achieved a collapse in solar panel costs

Because the problem of the climate is global, Hepburn  cites other economists who have advocated for a ‘climate club’ approach to reciprocal action, rather than the tradition of beggar-thy-neighbour nation states. We need cooperation and coordination:

‘In the context of biodiversity, approaches to be considered include production standards set by creative coalitions of nation states and corporations, mandating that consumer demand is met by supply chains that do not harm specific habitats and species.’

Oxford Today spoke to Alberto Carrillo Pineda, who heads Science Based Targets and Renewable Energy at the Carbon Disclosure Project in London. Whereas it might be argued that ‘voluntary’ disclosure of climate emissions couldn’t work in a capitalist economy, he argues that in fact the mood has altered dramatically in recent years, and that voluntary disclosure and emissions reductions are working, principally because the investor community has begun to model risk into their long term investment horizon, and to insist on transparency.

If oil is about to become a stranded asset, then it would be very risky to invest in an oil company.

Risk used to mean economic or business risk, but with climate change now a reality, the environment has shot up in importance, particularly in obviously prone sectors such as agriculture. Pineda says, ‘That’s why we’ve seen such a fast snowballing of companies disclosing with us: from 200 in our first year [2000] to 5,600 today.’

Pineda agrees with Hepburn  that supply chains are terribly important, because they get left out of conventional measurements of ‘direct emissions’ yet usually account for the bulk of emissions.

The Carbon Disclosure Project claims to have 100 large corporations now signed up to a supply chain reform program affecting 10,000 suppliers and US$3 billion in spending money.

In the banking sector HSBC recently claimed that it will provide $100 billion in sustainable financing by 2025, supporting ‘clean energy and lower carbon technology.’

In the pension sector, the public sector UK Environment Agency Pension Fund, headed by Emma Howard Boyd, has aligned its investment strategy with so-called transition pathways that relate to the greater concept of greening the world economy. This is widely expected to spread across other public sector pensions, and to bring large sums of capital to bear on green technologies.


It was the sun wot won it - the big black sphere is solar energy and it dwarfs the other sources

In his alumni talk Hepburn  also cited numerous technology breakthroughs, some with distinct Oxford flavours – such as new, highly efficient solar technologies of the sort covered in the April print issue of Oxford Today. These are the sorts of large-scale reforms that might – just might – save the world from itself, Hepburn  suggested.

Slides by Cameron Hepburn; other photos by University of Oxford/Richard Lofthouse

Cameron Hepburn is an economist with expertise in energy, resources and the environment. He is Professor of environmental economics at the University of Oxford, based at the Smith School and the Institute for New Economic Thinking at the Oxford Martin School, and is also Professorial Research Fellow at the Grantham Research Institute at the London School of Economics and a Fellow of New College, Oxford. In 2013 he co-edited with Dieter Helm, (Professor of Economic Policy at Oxford) Nature in the Balance, The Economics of Biodiversity (OUP, 2013). The book cited in this article is called National Wealth: What is Missing, Why it Matters, Edited by Kirk Hamilton and Cameron Hepburn, published in October 2017 by Oxford University Press.