“Moral hazard” arises when a policy or stance makes it easier for the subject of that policy or stance to do something bad. It is usually couched in terms of financial markets, and taking on too much exposure to risk and has been most frequently used in the context of how federal deposit insurance or “bail-outs” make it more likely that bankers would breach their fiduciary duties and make too many risky loans since they know they won’t face the full downside of their actions. It dates back to the development of English insurance markets in the 17-18C and was bandied about amid the financial crises of 1997-98 and 2008-9.
Lately, however, it has become a common term in the policy debates about what to do about climate change. The concept is superficially applicable, but those that raise the concern are naïve and idealistic, which could actually contribute to a much worse outcome than we’re currently headed for.
In particular, the “moral hazard” argument has been raised by those who oppose a variety of climate solutions—including increased renewable energy sources, carbon capture, and, most recently, the possibility of solar geoengineering—that would reduce our dependence on the ultimate (and necessary) solution set: broad and fundamental changes in modern human behavior.
There is considerable merit to the argument that people are lazy, especially when it comes to disrupting the deeply-ingrained habits of arrogance, nescience, and entitlement manifest in the way we live, buy, and waste. As a species (and as to most individuals), we are short-sighted and selfish. The imminence of climate-caused disasters still leaves their impact in an undefined future and, compared with our affinity for instant gratification, it’s all too easy to push those longer-term costs and pain away in favor of yet another extravagance.
As I have suggested earlier, it’s only when those costs and pain start mounting dramatically and relentlessly that we are likely to take the more dramatic and painful steps around reducing consumption and changing individual and societal behaviors to mitigate what will, by then, be on-going catastrophe.
The argument from “moral hazard” is that people should change and need to change and that they won’t change if there is an easier way out. So, we should not take mitigatory steps which will only delay the looming environmental disaster and thereby enable folks to defer facing that reality. The “moral hazard” argument seems to be based on a belief that as a species we can somehow step up and do the right thing even in the absence of dire threats. It’s an argument from hope in human enlightenment. It would be really swell if it was right, but there’s no history behind it.
In the meantime, according to this argument, we should eschew steps taken by those who are willing and able, but which don’t involve broad changes in general human behavior either directly or as the result of governmental policies (e.g., carbon markets, tax structures). I don’t pretend to know if a massive program to blast sulfur into the atmosphere or some kind of solar umbrella in space are even feasible means of producing the necessary planetary cooling. Both the technology and economics of carbon capture schemes are, to say the least, speculative. Nuclear power is feasible as are other renewable energy sources, even if they would make it easier for folks to consume more energy than they otherwise would. So, to oppose such steps—in principle—seems to me to be trying to prevent real (even if incremental and incomplete) progress in reducing the threat.
That is not to say we should rely on such unproven concepts. A lot of imaginative engineering—both technological and financial—will be needed to bring any of these into the real world and contribute to bending the curve of our increasing global temperature. But, given what we know of widespread political dysfunction and deep social inertia, looking to legislators and consumers to suddenly (or even briskly) “see the light” is at least as much of an “unproven concept” as sulfur in the atmosphere, geo-thermal energy, or mega-scrubbers of pollutants. The situation is sufficiently dire that we can’t afford to exclude on any one of these channels to make some progress. [Unpaid-non-political announcement: this is why I like tree-planting. It requires no new technology, the economics are demonstrable, and we don’t need the attitudinal changes at either the political level or in terms of broad cultural change to make serious progress.]
In addition to the long distance between concept and execution, we also need to be careful because many of those urging apparent panaceas have vested interests in maintaining the status quo and are creative (disingenuous?) in promoting ideas that will enable them to keep drilling, mining, spending, consuming, wasting etc. The key is to ensure (much more easily said than done) that the necessary underlying changes are made in global production and consumption patterns. In other words, buying more time is a good thing only if we actually use the time well.
I suspect that there may be more than a little Puritan school marm in the “moral hazardists.” Their idealistic purity about the “right” way to fix this problem is logically sound, but in the real world, students get dirty from dust in the playground, pass notes, and don’t always do their assigned reading.
Indeed, I would look forward to a situation in which one of these alternative vectors developed into something that proved effective and could have a considerable impact on the state of the planet. That some such relief would allow for more transition time seems—at this stage—a price I would be willing to pay. To cut them off preemptively would be the real moral hazard.
Lately, however, it has become a common term in the policy debates about what to do about climate change. The concept is superficially applicable, but those that raise the concern are naïve and idealistic, which could actually contribute to a much worse outcome than we’re currently headed for.
In particular, the “moral hazard” argument has been raised by those who oppose a variety of climate solutions—including increased renewable energy sources, carbon capture, and, most recently, the possibility of solar geoengineering—that would reduce our dependence on the ultimate (and necessary) solution set: broad and fundamental changes in modern human behavior.
There is considerable merit to the argument that people are lazy, especially when it comes to disrupting the deeply-ingrained habits of arrogance, nescience, and entitlement manifest in the way we live, buy, and waste. As a species (and as to most individuals), we are short-sighted and selfish. The imminence of climate-caused disasters still leaves their impact in an undefined future and, compared with our affinity for instant gratification, it’s all too easy to push those longer-term costs and pain away in favor of yet another extravagance.
As I have suggested earlier, it’s only when those costs and pain start mounting dramatically and relentlessly that we are likely to take the more dramatic and painful steps around reducing consumption and changing individual and societal behaviors to mitigate what will, by then, be on-going catastrophe.
The argument from “moral hazard” is that people should change and need to change and that they won’t change if there is an easier way out. So, we should not take mitigatory steps which will only delay the looming environmental disaster and thereby enable folks to defer facing that reality. The “moral hazard” argument seems to be based on a belief that as a species we can somehow step up and do the right thing even in the absence of dire threats. It’s an argument from hope in human enlightenment. It would be really swell if it was right, but there’s no history behind it.
In the meantime, according to this argument, we should eschew steps taken by those who are willing and able, but which don’t involve broad changes in general human behavior either directly or as the result of governmental policies (e.g., carbon markets, tax structures). I don’t pretend to know if a massive program to blast sulfur into the atmosphere or some kind of solar umbrella in space are even feasible means of producing the necessary planetary cooling. Both the technology and economics of carbon capture schemes are, to say the least, speculative. Nuclear power is feasible as are other renewable energy sources, even if they would make it easier for folks to consume more energy than they otherwise would. So, to oppose such steps—in principle—seems to me to be trying to prevent real (even if incremental and incomplete) progress in reducing the threat.
That is not to say we should rely on such unproven concepts. A lot of imaginative engineering—both technological and financial—will be needed to bring any of these into the real world and contribute to bending the curve of our increasing global temperature. But, given what we know of widespread political dysfunction and deep social inertia, looking to legislators and consumers to suddenly (or even briskly) “see the light” is at least as much of an “unproven concept” as sulfur in the atmosphere, geo-thermal energy, or mega-scrubbers of pollutants. The situation is sufficiently dire that we can’t afford to exclude on any one of these channels to make some progress. [Unpaid-non-political announcement: this is why I like tree-planting. It requires no new technology, the economics are demonstrable, and we don’t need the attitudinal changes at either the political level or in terms of broad cultural change to make serious progress.]
In addition to the long distance between concept and execution, we also need to be careful because many of those urging apparent panaceas have vested interests in maintaining the status quo and are creative (disingenuous?) in promoting ideas that will enable them to keep drilling, mining, spending, consuming, wasting etc. The key is to ensure (much more easily said than done) that the necessary underlying changes are made in global production and consumption patterns. In other words, buying more time is a good thing only if we actually use the time well.
I suspect that there may be more than a little Puritan school marm in the “moral hazardists.” Their idealistic purity about the “right” way to fix this problem is logically sound, but in the real world, students get dirty from dust in the playground, pass notes, and don’t always do their assigned reading.
Indeed, I would look forward to a situation in which one of these alternative vectors developed into something that proved effective and could have a considerable impact on the state of the planet. That some such relief would allow for more transition time seems—at this stage—a price I would be willing to pay. To cut them off preemptively would be the real moral hazard.
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