Abstract
Neoliberal economics has opposed or rolled back policy measures designed to protect the environment. Neoclassical economics recognises environmental degradation as a classic example of an externality and frames its response in terms of correcting that market failure, but the limitations of its marginal cost-benefit approach have been exposed in the relevant climate change debate. This chapter draws on the author’s experience in designing and applying macro-sectoral economic modelling to analyse the economic impacts of environmental policy for policymakers, with specific reference to climate change mitigation policy. The chapter explores the role that the key insights of post-Keynesian and Schumpeterian economics (such as path dependence, radical uncertainty, the presence of heterogeneous actors, the role of money and finance, constraints imposed by stock-flow consistency and the representation of endogenous technical change) play in forming an analysis of environmental policy. This is better adapted to the challenge of tackling relevant global warming.
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Notes
- 1.
It is debatable whether President Trump and politicians with similar convictions can be classified as ‘neoliberal’ given their predilection for protectionism in trade policy. But they do share and draw support from the neoliberal suspicion of strong government intervention when it comes to environmental policy.
- 2.
- 3.
- 4.
See Pollitt (2019) for a modeller’s perspective on the opportunity for post-Keynesian analysis to meet the needs of policymakers seeking to confront the climate crisis.
- 5.
The concept of natural capital embodies an anthropocentric approach to the question of why we should take care of the environment. See Williams (1995) for a discussion of this ethical stance.
- 6.
Natural Capital Committee (2013, p. 10).
- 7.
Haines-Young and Potschin (2018).
- 8.
- 9.
- 10.
Following the terminology of Arrow et al. (1996).
- 11.
A term coined by Sen and Williams (1982).
- 12.
- 13.
In the formula developed by Ramsey (1928).
- 14.
One way of extending CBA under these circumstances is to use multi-criteria decision analysis, an approach now included in the UK government’s economist’s toolkit. Available at: https://www.gov.uk/government/publications/green-book-supplementary-guidance-multi-criteria-decision-analysis
- 15.
See Grubb et al. (2014, Section 8.8, pp. 302–305) for a fuller discussion.
- 16.
- 17.
Available at: www.e3me.com
- 18.
Available at: https://sustainabledevelopment.un.org/?menu=1300
- 19.
See the discussion of Hsiang et al. (2017) above in this chapter.
- 20.
Unless they assume full employment in the ‘business as usual’ scenario against which the transition scenario is compared.
- 21.
Available at: www.bbc.co.uk/news/world-europe-49544781
- 22.
Exceptions to this general rule were reported for the French public employment service and charitable/not-for-profit organisations, for example, in the United Kingdom .
- 23.
‘Germany to spend up to $44 billion to cushion coal exit’, as reported in: apnews.com/f3e79e70c2e547428db34a9f1b073f42
- 24.
- 25.
The Long-Term Strategy baseline is a ‘current policies’ scenario, sufficient to achieve a cut in EU CO2 emissions by 65% compared with the 1990 level, rather than the reductions of between 80% and 100% in net emissions required to meet the Paris Agreement’s objectives (well below 2 °C and towards 1.5 °C).
- 26.
The business-as-usual scenario is the Commission’s REF2016 projection for energy use, and the scenarios with greater ambition are the various EUCO scenarios.
- 27.
In practice, as already noted, an individual bank will not receive back all the deposits it creates from any loan it makes. However, collectively, the banking system holds the deposits that match all the new loans. If agents decide to repay loans rather than hold deposits, the deposits are destroyed and the banking system’s loan assets fall by a matching amount. In an open economy; a country undertaking additional investment may see a deterioration in its balance-of-payments current account. To that extent, the initial deposits created by the loan come under the ownership of foreign banks who create matching foreign-currency deposits for the foreign residents who supplied the imported investment goods.
- 28.
Available at: https://www.ngfs.net
- 29.
- 30.
Available at: https://www.fsb-tcfd.org
- 31.
Available at: https://www.blackrock.com/hk/en/larry-fink-ceo-letter
- 32.
- 33.
- 34.
Available at: https://neweconomics.org/campaigns/green-new-deal
- 35.
- 36.
Reported in Tett (2020).
- 37.
Tett (2020).
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Lewney, R. (2021). Environmental Policies to Save the Planet. In: Arestis, P., Sawyer, M. (eds) Economic Policies for a Post-Neoliberal World. International Papers in Political Economy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-56735-4_5
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