Coordinating Public and Private Sustainability

Green Energy Policy, International Trade Law, and Economic Mechanisms

Roy Partain

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781351370578
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

This book demonstrates the need to coordinate private and corporate actors with national and global sustainable climate policies, with conventions in the spheres of green energy laws, as well as from the spheres of commercial, trade, and other private law.

While many states have joined together in the Paris Agreements in support of green energy policies, it remains a stark reality that most of the efforts to reduce greenhouse emissions remain with private actors who operate the various industries, vehicles, and vessels that emit the gases in target. The risks of anthropogenic climate change cannot be solved by environmental law alone and will need complementary support from commercial, corporate, and private law. However, aspects of commercial law, securities law, and trade law can be shown to frustrate certain aspects of green energy policies, resulting in damaging "green paradoxes". It raises issues associated with corporate social responsibility and green paradoxes, with international trade laws, and with liability risks for misrepresenting the state of feasible green energy technologies.

The book will be of interest to students and scholars in the fields of energy law, environmental law, and corporate law.

1
Introduction

1.1 Why this book should be read

This book examines how policymakers can better ensure that robust green energy policies are selected and enacted to best ensure the achievement of a sustainable future for all of us and for all future inhabitants on this planet.

The real question, though, is why hasn’t this happened already?

There are two hidden problems in that goal, (i) how do policymakers identify which energy policies are robust in reducing greenhouse gas emissions and in reducing the threat of climate change and (ii) how might public rules be drafted and designed to best ensure their success to achieve those public goals of a sustainable and green future, given an already complex legal space of private law, trade law, and other laws in support of energy policies?

In particular, Hans-Werner Sinn challenged this basic agenda for green energy policies, claiming that green energy policies are doomed to fail because the combination of public goals to reduce carbon emissions will motivate private actors to increase their carbon emissions, for reasons discussed in detail over several chapters, resulting in what he labeled as green paradoxes.

So, are green energy policies doomed before they even begin? This book endeavors to suggest that they are not doomed, but that if green energy policies are drafted without considering the economic mechanisms engaged by both the pre-existing legal frameworks and the to-be-implemented green policies, much inefficiency and frustration could result. This book hopes to clarify where certain policy hazards lay and where other pathways may be feasible.

Might private self-interest thwart and frustrate the goals of a sustainable future, as predicted by Sinn? Or, could a ‘moon shot’ level of investment in diverse green energy projects enable a secure pathway to reduced carbon emissions? What if the situation is actually really complex; can we introduce new legal rules into a complex system of pre-existing legal rules, both public and private, to avoid problems and encourage better pathways?

This book attempts to examine which pathways might be more robust to prevent that frustration of green energy policies by corporate actors in the energy space; which energy goals are more resilient in keeping both corporate interests and public policy aligned to achieve a sustainable future?

This book will explore how economic models have provided arguments on both sides of this debate and how one might proceed to evaluate the claims of ‘fitness,’ which arguments best match the observed conditions and robustly provide pathways to our policy goals? It will examine a range of the proposed green paradox models to determine if any hold true dangers for policymakers. The book will go on to critically evaluate and sometimes counterargue against the models used in green paradox models.

The book will then evaluate the ‘moon shot’ approach; can too much green energy policy be a problem in itself? The findings will be that, yes, sometimes too much could be counterproductive for unexpected reasons. But a key finding is that abundant green energy is likely, without certain safeguards, to create competitive pressures for fossil fuels to become available at cheaper prices and likely enable consumers to purchase more fossil fuels and to emit more carbon.

The book will then examine the consequence of uncoordinated energy policies, as currently exist in multiple settings. It will explore the consequences of energy policies developed for purposes of ‘national security’ and for ‘energy security’; that these rule sets operate in both green energy and fossil fuel policy spaces causes additional concern for guiding energy policy to a greener future. This is followed by a similar examination of how international conventions and agreements to ensure energy supplies potentially overlap with green energy policies. Next, the book also explores the dangers to green energy policies created by international trade laws that were designed to aid developing economies but without intent to address green energy policy concerns.

Finally, the book will provide a set of policy recommendations on how to best avoid the uncovered problems while remaining on the path to a sustainable future based on green energy policies – all the while considering the strategic needs and planning of corporate entities to ensure that they too are harmoniously on the same path to a green future.

1.2 The central purpose of this book

Hardin once wrote that inescapable social problems, those without rational solutions, should be considered tragedies in the dramatic sense.¹ Hardin’s ‘Tragedy of the Commons’ was based on the mathematical method known as game theory, that we can examine social problems from a game theoretic perspective to learn and examine the range of potential outcomes from strategic choices. Hardin was concerned that certain social problems, if thusly examined, resulted in failure in all potential outcomes. And on point, he was quite concerned that many environmental problems faced exactly such a situation, that strategic choices made by many diverse parties would lead to sure environmental doom, accompanied by great human suffering.

Sinn presented an argument that would appear to establish that all green energy policies, policies that reduce greenhouse gas emissions, are not only doomed to fail but will also hasten the very evils that they were intended to prevent. This potential green paradox has been analyzed and examined by multiple economists,² and surely if there are mechanisms within climate change laws and conventions that give rise to green paradox results, legal researchers, legislators, and climate change policymakers should take caution and consider revamping the existing framework of international climate change conventions and associated domestic policies.

This book suggests that there are both pathways towards and away from green paradoxes, that certain pathways do not result in tragedies in Hardin’s sense of inevitability, but that other pathways might indeed be ‘tragic’ in character and genuinely tragic in consequence.

This book attempts to clarify how policymakers can establish effective green energy policies by illuminating where Scylla and Charybdis lurk, so that we can best navigate to avoid those dangers while remaining on path to our goals.

1.3 On choice of corporate actors and corporate entities

This book does make a simplifying assumption, made sotto voce, to focus on corporate actors and similar for-profit group-based entities. This is for several reasons.

The first is that while a human actor, arguendo, has a soul, a family, and a place in this world beyond profits and earnings, many legal entities such as corporations are legally bound to prioritize profitability and the creation of net income and positive earnings for their investors and shareholders. Thus, while a human has a wide array of concerns to balance beyond narrow profit-seeking, from ethical and religious views to family and community concerns and private and personal goals that may be wholly non-market-based, a corporate entity is likely to set profitability as one of its key goals, if not the dominant or sole goal, of its raison d’être. This narrow focus, on profitability, facilitates behavioral model-making for policy-makers, versus the potential complexity of attempting to plumb and model genuine human behavior.

Second, the vast majority of industrial energy facilities are owned, operated, and stewarded by corporate actors and are not in the direct hands of human investors. Thus, even if one could realistically model a private human’s interactions in regard to green energy policies, it might not be sufficiently representative of the task at hand, to guide the whole economy to sustainable pathways of energy policy.

1.4 Readership

This book is perhaps best read by readers who are curious to learn why, if we can recognize the dangers of carbon emissions, have we failed to find a more effective and robust method to guide human activity and industry to achieve a greener alternative? This book is primarily produced with the hope of enlightening readers to understand how the structural elements of green policies interact with other energy policies and with the economic ‘logic’ rules of profit-seeking enterprises. It is the hope of the author that such readers can come to appreciate the complexity of the situation, to better support robust green energy policies, and to better understand the need to develop these policies in the foreknowledge of how corporate actors can become better integrated and integral to the success of these legal frameworks.

Policymakers and environmentalists will find this a motivating read in that it provides explicit policy recommendations on how to better design environmental rules, particularly rules for green energy policies, that can robustly respond to the challenges presented by the corporate actors active in the various energy industries. It will also highlight how seemingly disjoint areas of law, such as national security or economic development, can come to have substantial impacts on the effectiveness of environmental legal frameworks.

Environmental scholars will find this book of use because it illustrates the advantages, and perils, of relying on economic models to bolster policy arguments. This book is self-evidently aware and informed by the economic analysis of law. The book is equally up front that it is examining law as a type of formal structure, that law can be modeled within game theoretic terms and methods. That the book reveals both benefits and potential disadvantages to such an approach enables it to serve as a guide to ‘best use’ for these modes of analysis.

1.5 Synopsis and structure

This study presents a review of green paradox models,³ finds a list of potential sources of green paradox events, and queries if various legal frameworks could enable effective policy responses to those causes of green paradoxes or will those rule sets exacerbate those causes and worsen green paradox events?

This study finds that the result is a mixed bag; specific issues can be seen as beneficial or detrimental, but the combination of those effects is found to be difficult to forecast.

Chapter 2 delivers an introduction and survey to the concepts addressed by the green paradox models. From the UNFCCC targets for the adoption and support of green energy policies, Sinn’s early green paradox models are developed. Sinn’s theoretical contributions are discussed. His original model of emergent green paradox phenomena is described, and his initial and seminal reliance on Hotelling’s model is discussed. Also, his concerns on the inevitability of green paradox problems are reviewed. Similarly, brief explanations of other green paradox models and classifications of green paradox models are provided. A listing of the fundamental types of green paradox models is presented.

Chapter 3 provides introductions and explanatory notes to the four major classes of green paradox models and to one particular integrated class of green paradox models. Throughout the review of the model classes, the central reliance on Hotelling or Dasgupta Heal models is demonstrated. Even when certain models do not directly derive from those two model classes, they often include assumptions that bring their modeling functions in alignment with those two model classes, thus similar results entail.

Chapter 4 investigates the question, are Hotelling and Dasgupta Heal models problematic for the investigation of green paradox models? This study finds that those models might in fact be of concern, especially for legislators and policy-makers concerned with the potential effects and side effects of prospective green energy laws. The discussion on Hotelling’s model explores the origins and development of his original models. It explains how the models are intended to operate. It provides a detailed listing of Hotelling’s central assumptions and demonstrates that Hotelling provided specific caveats on his assumptions and that other evidence can be brought to raise concerns on the applicability of those assumptions to green paradox research. Thereafter, the Dasgupta Heal models are explored with a focus on demonstrating their close affinity with the Hotelling models’ assumption, and thus that they would be equally of concern for green paradox modelers. A conclusion is obtained that Hotelling was well aware of the limits of his models, that Dasgupta and Heal extended his models without substantial change to the core assumptions. Thus, the various classes of green paradox models that build on either Hotelling or Dasgupta Heal models also have inherited the same concerns for which Hotelling had previously provided caveats. The chapter concludes that models researching green paradox phenomena built upon either Hotelling models or Dasgupta Heal models need to be provided with precautionary adjustments and caveats for legislators and policymakers.

Chapter 5 shifts the discussion from formalistic economic models to observing the interplay, both planned and unexcepted, from implementing new systems of new legal rules into a functioning complex environment of legal rules, herein the introduction of new green energy policies into a complex set of international trade laws, domestic energy security laws, and international conventions that encourage harmonization across transnational energy markets. The research question is transformed from a specific set of economic models of green paradox results to a broader notion of policy frustration from the complex interplay of uncoordinated energy and other policy frameworks. Might too much of a good thing be a problem for green energy policy?

In Chapter 5, the concept of overstimulating policy response is explored. The concern here is that too many legal frameworks to address energy policy, including policies specifically designed for green energy considerations, could lead to larger carbon emissions. This is not necessarily a green paradox, but there are overlapping areas of concern, that policies not necessarily meant to engage in green energy policies at all do in fact play substantial roles in the effectiveness of those green energy policies, usually through interactions in the marketplace.

Chapter 5 begins with a discussion on the potential for energy efficiency policies to become ineffective; Jevons paradox is discussed, with its Khazzoom-Brookes postulate that establishes that improvements in energy efficiency will increase energy consumption, ceteris paribus, due to resultant changes in both supply and demand for energy supplies. The chapter proceeds to introduce issues related to the sharing or ‘transfer’ of green technologies to better support all nations in their quest for green energy solutions. The chapter also covers the notion of common but differentiated obligations to achieve the goals of climate change prevention.

Chapter 6 examines the role of energy security laws, i.e., those laws that support the secure supply of energy resources against adverse conditions, in driving innovation in energy. Chapter 6 looks to the laws of the United States as an example of such energy security laws. Such targets might include securing petroleum volumes or energy alternatives, such as nuclear energy. Motives for energy security laws might be to protect energy prices from market forces or to support militarized forces. The chapter reviews the vast array of tax incentives and advantages provided to create, support, and subsidize energy policy in the US, finding that the tax code may be the largest provider of active budget support for energy projects in the US.

Chapter 7 inspects two major conventions that address the issues of energy security and international economic stability, the Energy Charter Treaty and the OPEC conventions. The ECT is reviewed both with an eye to its role to provi...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• Detailed table of contents
• Acknowledgements and notes of appreciation
• List of abbreviations
• 1 Introduction
• 2 Survey of green paradox models
• 3 Internal mechanisms of green paradox models
• 4 Misplaced reliance on economic models of exhaustible resources
• 5 Complexity in energy policies can lead to greater emissions
• 6 Impact of domestic energy security policy laws
• 7 Impact of international energy conventions
• 8 International trade laws could frustrate green policies
• 9 Choosing better policies
• 10 References
• Index