Jeffrey Sachs, professor at Columbia University and a global leader in sustainable development, presented at Luohan Academy's Frontier Dialogue. Christopher Pissarides, a Regius Professor of Economics at the London School of Economics and a Nobel laureate, discussed Sachs's presentation. The following texts features transcripted excerpts. It has been lightly edited for clarity and length.
Speaker presentation by Jeffrey Sachs
Thank you. Patrick. Thanks for sharing. Maybe we can hold off the questions. The final topic of the day is "How to Sustain Growth and Realize Net-Zero Common Goals in the Digital Age", the presenter is professor Jeffrey Sachs. He is a university professor at Columbia University and a global leader in sustainable development for many years. Jeff, please take it away.
Thank you very much. It's nice to see a lot of friends, a lot of teachers, people that I admire on the line. I hope I'm not too redundant in observations that I'll make. I'm speaking from the hall of the Food and Agriculture Organization, which is having a pre-summit today of the summit meeting on sustainable food systems. So that's the venue. I think the key points to start, as everybody knows, is how urgent the timeline is and how important net zero or net negative emissions are, for just about any reasonable prospects for much of humanity in the coming decades. We're already on a trajectory very likely, I would say, to exceed the 1. 5 ℃. The world is about 1.23℃ or 1.24 ℃ above pre-industrial [situation]. The increase is somewhere around 1.25 ℃ to 1.3℃ per decade on the current trajectory.
There are lots of tipping points, nonlinearity that should be expected. We're probably living through a number of them this summer. From a policy point of view, I think that even more important than pricing is just regulation. So a quantity system to get us to zero, no new coal, oil, or gas infrastructure. I think carbon capture and storage will play some roles, but a modest one. I think we're basically going to zero carbon energy. Fortunately, we have a lot of it at very low cost.
And we need to do it decisively. China has committed to net zero by 2060, and should actually achieve that well before 2050. And that is feasible. And I hope that the Chinese colleagues and scholars are looking at accelerated time lines. 2060 just isn't good enough for the world. Even a 50% chance of ending the century below 1.5 ℃ requires a basically a net zero by 2050 or earlier. The basic trajectory is pretty clear: clean power, basically zero carbon power, electrified transport and green fuel carriers. Probably hydrogen being the most important, made by clean electricity. And that can get us to almost a complete decarbonization of energy use. We still have lots of land-use challenges which contribute probably about 1/3 of greenhouse gases, about 20% of CO2, a lot of methane, a lot of N2O.
And so there's a lot of complex land use changes that is needed. I think pricing can play a supportive role. It's got one basic, delicate point, which is if you put tax on carbon emissions right now, you're mainly taxing old capital for a long time. So there's lots of arbitrary and politically dangerous redistribution. What we want to do is tax new decisions, real decisions. And that means phasing in the carbon tax, but basically a regulatory approach, I think it's pretty clear, and the technology pathways are clear.
Where does digital fit in all of this? It is our profound ace in the hole. I think I'm making a distributed green energy and transport system work. We need smart grids. At least 5G, then there will be 6G and 7G by mid-century. Decarbonization allows for lots of resource saving, for dematerializing lots of production, allowing us to meet like this, that we have saved lots of CO2 emissions [by] meeting face to face on zoom, rather than face to face in person. I don't know about you, but I like to teach my courses this way, actually, as a positive. I don't view it as a negative, I view it as a very natural way to teach.
You can have students all over the world. You don't have to be in a classroom, you don't have to get in a car to go anywhere. I think that is extremely beneficial. Almost every core service, health care, education, finance, government service has a very substantial part that can be done digitally. So I think we'll be moving to that kind of digital world. E-commerce is a lot more efficient, potentially than shopping; or shopping online and delivery direct to consumer is potentially a lot more efficient than a shopping in central business districts or in shopping centers or in malls. I think we'll have a lot of saving there. Working from home, in general, is a terrific thing or working from anywhere is a terrific thing.
I think we should be aiming for a world that really has very little automobile ownership in the future. I take a lesson from Singapore or Hong Kong, where per capita car ownership in excellent transport systems is 1/4 to 1/10 of that of the normal development pathway. This will save a lot of development costs and accelerate development by having a digitalized mobility as a service, rather than automobile ownership in the future, which eats up a tremendous amount of material consumption and is a very, very heavy cost.
I think if, we think creatively about the digital world. Costs come down phenomenally. So does development, which is the corner of this project that I'm especially interested in what poor countries can do. This is a fantastic leapfrog opportunity. You don't need to be near a doctor for at least half of your medical care. You don't need to be near a classroom, a teacher, or a tutor for a tremendous amount of education. You don't ever have to see a bank again. You don't ever have to see a government agency again for your licenses, maybe with a few modest exceptions. You don't ever have to own a car again.
If we think in these terms constructively, there is a tremendous leapfrog opportunity for poor countries in all of this. I'll just end the brief opening remarks by saying that, if the US and China would cooperate on this rather than the US trying to make some boneheaded medieval new cold war with China, we'd actually solve these problems a lot faster. As I get older, I marvel even more at the stupidity of my own country. But basically, we're in a neurotic phase in the United States. So China is the source of all our ills. It's very dangerous. We ought to be cooperating on solving the climate problem, the land use problem, the supply chain problems, and the cyber security problems and 5G problems together. We have to actually de-militarized these technologies. This is the biggest problem, which is all of these solutions are "duo-use." Once that's your mindset, it's impossible to get the single civilian use from the national security agenda.
So we really have to demilitarized this digital technology. We need cyber treaties. We need a lot of confidence building between the US, China and the European Union, but especially between the US and China. I didn't say much about the dual side of things, the pricing and the incentive side. I talked about the primal side of this optimization problem. We need a tremendous saving of resources through digital, but the tools could not be better for that. I think if we aim strongly for accomplishing development objectives, as well as sustainability objectives.
Discussant presentation by Christopher Pissaride
Neng Wang :
Thank you, Jeff. The discussant is Professor Sir Christopher Pisarides. Chris is a Regius Professor of Economics at the London School of Economics. He's a Nobel laureate, and also a member of academic committee of Luohan Academy. Chris, please take it away.
Thank you very much and thank you Jeff's remarks. For those remarks. I wasn't sure what Jeff was going to talk about. I knew he wasn't going to have slides. So he said not to have either. So there's something too.
You probably knew more than I did what I was going to talk about.
Probably what I heard a few times before. I saw that most of the panelists were micro-economists. I decided to go for macroeconomics more explicitly. I was talking between two topics, the structural change required the labor markets for the decarbonization, which is what I suggested to Long, but I decided to go for my other macro topic, which is the role of government to accelerate the path to sustainable growth, partly because there are so many people talked about sustainable growth, rather than the labor market. Government actually is needed, I believe, in the path of sustainable growth, because sustainable investments in production methods do not yield sufficient returns to the individuals bearing the cost. There is a kind of externality having that biggest return to society as a whole in the long periods of time.
Now, climate change, major climate events. In addition, they impact particular sectors of the economy, and society, and geographic areas unequally, that's the impact and very often in unanticipated ways. In these cases, there are general market failures that do not allow efficient insurance markets against these risks. I mentioned these risks, especially because we have to realize that disasters will happen whether we like it or not, climate disasters. So we have to plan adaptation policies as well as education. Action, practically, every speaker I had before was talking about education rather than adaptation. How do we deal with these disasters?
I first briefly discuss what governments can do to give incentives to individuals and companies to behave in an environmental system in a sustainable way. And then I look at more direct measures that governments could take, especially in the age of COVID 19, which in fact relate to some remarks that Jeff made just now. Now, when we look at individuals at household first, individuals, the key here, I think is the governments should be taking more action at education.
Now how aware individuals are of climate risks, both prevention of greenhouse emissions and risks of disruptions from climate events? Not enough where they should be, in my view. Modern research in the economics of education, Jim Heffman and friends, shows that the most effective investments in education are the ones that take place very early in life. I believe the basic environmental instruction should begin with well-organized preschool instruction from age three or even earlier, using methods that children of that age can appreciate, just like children learn how to articulate words and sentences and how to play games that teach them about numbers and shapes. They should be told about avoidance of waste, importance of environmental respect such as tree planting, looking after plants and animals, and other relating instructions.
And all this can be done part of play. I don't see much of that happening in schools that I know in the UK and Cyprus where I know about the education system. A little bit at the beginning in better schools. But there's certainly not enough, shown in research by many economists. It's going to be extremely important for the next generation.
Now governments of course have a key role to play here because most schools are state schools and they decide governments' influence, if not decide the curriculum. An environmental instruction should be part of the curriculum from the start of schooling with time such initiatives will result in a population that's aware of sustainability. In the same way as everywhere, language, numbers, use of personal computers, and so on.
Let me now turn again briefly to companies. Now, modern companies have moved on from the days when the guiding principle was the Friedman doctrine, which stipulated that the best way a company can serve the interests of societies is to maximize the rate of return for the shareholders. A number of people mentioned that especially Amit Gandhi with respect to Microsoft, and Eric Maskin his remarks, and others.
Now, it's obviously wrong to believe what the Friedman was saying some 30 years ago, maximizing the rate of returns, a short-term objective that ignores the damage that the company's actions can do to stakeholders. Then even if a company does not do damage, maximizing rate of return will not contribute positively to sustainability.
Nowadays, companies state many objectives in their mission statements. These generally covered the environment. They were being loyal to their stakeholders, which includes employees, customers in the local community. But whereas one finds frequent statements that emphasize these objectives, there is no enforcement mechanism companies that ensures they actually do it. That what Amit was talking about precisely the statement in that Microsoft was making, but there isn't legally binding enforcement mechanism. Companies are the products of the law. They are set up by law and they are regulated by law. The law should also test them against their stated social and environmental objectives, I believe. If they fail these, there should be penalties. Companies are penalized if they fail on its pension at commitments with employees, but it's not penalized if it fails in its environmental commitments, or at least promises to the local community. I don't think it should get a difference there, I think environmental and carbon commitments, even to societies in a whole, if you like, should be treated the same way as those commitments given to individual employees or to its customers.
Now, let me now turn to a more direct role of governments I have mentioned, and make some remarks about the societies coming out of COVID-19,
Governments have a direct role to play both in mitigating climate change by controlling greenhouse gas emissions, but also in preparing societies to deal with negative impact of climate change, fairly predictable events like rising sea levels or unpredictable ones, [such as] hurricanes, forest fires.
There are many reasons why government should be ones to taking action for sustainability, but mainly there are two. First, externality of private action that I mentioned before. Before they left a lot of people in companies and they invest in both medication and adaptation.
And second, climate action, especially adaptation projects, have a public good. For example, the project that protects agriculture from climate events or contains a river within its banks, a project that might be expensive to realize, but once they are established, they can be enjoyed by all citizens living in their vicinity.
Now, in the current situation of COVID-19 lockdowns, governments are spending large amounts of money to keep their economies afloat during the pandemic. They are planning even more spending to revive economic activity after the pandemic. European Union, for example, announced enormous amounts of money to help countries come out of the pandemic. It would be a mistake, I believe, to come back after the pandemic, and try to pop up alien companies and subsidized workers to ensure that they take back their old jobs.
Coming out of the pandemic. We present societies with a unique opportunity to divert investments to environmental sustainability projects, both mitigation and adaptation. There's an undoubtedly competition for public funds between mitigation and adaptation, but there are also compromises. Society might spend more on prevention in which case we will need less for measures to deal with climate events, or it can spend more in the infrastructure necessary for preparing themselves to deal effectively with climate disasters.
This is a social choice, but given the time horizons involved, both should be given priority of the other spending as we come out of COVID-19. Even that we know about the long-term impact between GHG emissions, climate, the current emphasis of governments, broadly in Europe, on decarbonization is probably correct. This does not mean that there should be no action on adaptation measures. In fact, I think that they have been neglected for too long. For example, developing countries with their large agricultural sectors need more infrastructure and more help of dealing with unexpected climate events. And giving what Jeff said about at his location, that's probably what he was talking about with his colleagues earlier on today.
Now, another feature about European government in the post-COVID economy, is a consequence of automation and the interaction between the COVID economy and automation. Automation has been taking place for several years now, beginning in the 1980s would be widespread use of computers. This continues now with robotics and artificial intelligence. AI is already helping with climate action, for example, by managing traffic in large cities. But more R&D is needed to yield its full potential.
The expectation, however, is that in the post-COVID economy, there will not be enough jobs to bring us quickly back to full employment. This is where climate action could help, in fact, talking as a labor economist now. Eventually, our economies are sufficiently resilient to bring us to full employment. But the time it takes can be long, and the demands of workers can be costly that you need to transition to new forms of skills and technologies.
Automation during Covid is accelerating and it's likely to take a lot of jobs away from workers, from sectors such food services and retail again. Discussion of Jeff from earlier has mentioned that.
Projects associated with global warming, such as more efficient use of energy and buildings, waste management, and renewable energy are more labor intensive than manufacturing is, or even that many jobs associated with services are, if government shift emphasis the environmental projects as we come out of the pandemic.
In addition to helping the path to sustainable growth, they also help reduce unemployment. True unemployment is currently higher than recorded because of government measures to support people to stay at work. But once these measures have scaled down, companies will not be able to keep all their federal workers employed. And employment will inevitably soar.
To conclude, I leave you with the main message that I wanted to convey. Climate action, mitigation or adaptation, needs all three actors, society, the public companies and governments to work together. But I believe the government do have the biggest role to play here, both indirectly through influencing incentives that I mentioned before through education and company at law and in other ways. And directly through their action, especially as we're coming out of COVID-19, where they could also help labor markets adjust to the accelerated automation from COVID and the job loss. Thank you very much.
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