Be informed

If you have a spare evening, buy this book and join the conversation between two wonderful dinner guests, Eric Lonergan and and Corinne Sawers. That said, I’m not sure that you’d get a word in edgeways, even if you wanted to. I suggest just listening and learning.

In the first instance, the format spooked me. It genuinely is written as a dialogue. The two conversationalists flesh out their arguments – they do not challenge one another, rather they develop one another’s points – or invite further development: “go on…” says Sawers, to avoid a cliff hanger. Unless one is paying absolute attention, it is not clear who is speaking, such is the mutual expertise revealed in the exchanges. The book can be read in one sitting.

This is not, be rest assured, one of those “I’ve read this so that you do not have to” reviews. I have been known to write these. Readers are invited into a conversation that needs full engagement (my copy has plenty of page markers for future reference, top left). In addition, if we are in luck, the shelf life of this book will be short. If we, our governments, and the global community more widely, make the transition, the book will have served its purpose and become a cherished museum exhibit.

I’ve reviewed some other books – Alice Bell’s wonderful, Our Biggest Experiment, for example – that reveal how we got to where we are. What we could have done; how we could have avoided the precipice that humanity has now perched itself upon. Those perspectives inevitably lead to despair and inaction. Lonergan and Sawers are future-oriented. There is little dwelling on the past. They discuss a bright future: one that is fair and safe. Readers do not even have to have that much knowledge about climate change because a couple of to-the-point sentences – to paraphrase Douglas Adams – “avoid all that mucking about in hyperspace” and gets readers up to speed. There is no time to waste. It is just better to start using the language of Super Charge Me straight away: appropriately-named EPICs (extreme positive incentives for change) and Mini Musks (those intractable problems – aviation and cement, for example).

What are EPICs? They are extreme because moderate does not change behaviour. They are positive because the behaviour change cuts carbon emissions. They incentivise (never think about something else when you should be thinking about the power of incentives, says Charlie Munger, Warren Buffett’s long-standing business partner, p172). It is all about change. In particular, change that reduces carbon emissions.

But what are they in reality? I have been led astray, it seems. It has been known for me to advocate carbon taxes. My dirty vehicle is taxed – the vehicle licensing cost is high for that reason and it costs more for my on-street parking than for cleaner vehicles. But I still have it. The incentive to ditch is not sufficiently extreme. I’ve learnt recently, that keeping it is potentially better for the environment than buying a new electric vehicle, thanks to a recent BBC show, Sliced Bread. But this is the wrong thinking. I should not be replacing it, I should be using a substitute. I do not because there is no incentive provided by the relative price of that substitute. For example, to visit my family tomorrow using the train would cost me £153. Even with the high price of fuel, my dirty vehicle could do it for half that cost, and I could take two people and unlimited luggage (it is a van) with me. The substitute, if I read the authors right, needs the EPIC treatment by Government. It is their job to fix the relative price and provide the incentive to switch. More generally, it may need investment in infrastructure to do it (more trains/capacity), a change in work practices allowing slower and shared commutes or fewer and, ultimately, a change in the norms of behaviour – actually it is a bit passé to drive a dirty white van rather than take the train. What, no photovoltaics on your roof?! Etc.

These are obviously EPICs for individuals, but there are EPICs for states. EPICs are responsible for the collapse in the cost of solar/photovoltaics and wind power. My new favourites that are going straight into my curriculum are captured in the Green Bretton Woods and Green Trading Agreements. The institutions of the Bretton Woods post-war agreement include the IMF and the World Bank. In the context of the transition, Lonergan cheekily says that “I am not sure that the World Bank is up to the task” (p144), but credits the designers of the post-war economic system with bestowing upon the IMF a “magic power” that was apparently leveraged in the banking crisis of 2008 and more recently in the global response to Covid-19. This power is manifested in a “special drawing right” (SDR). Readers can discover the magic for themselves, but I would entirely concur with Lonergan that the designers of the Bretton Woods institutions covered all bases insightfully and provided utility well into the future.

Thanks also to the conversation, I now also know about Export Credit Agencies (they’d somehow passed me by). These agencies mitigate credit risk for banks lending to low-income countries. The authors argue that they can be repurposed towards carbon-reducing investments. They have served the fossil-fuel industry well in the past and can serve transition economies well, too, into the future.

The book also provides an strong argument for countering the “stranded assets” challenge. Stranded assets are long-lived assets that, if economies transition to net zero with haste, will lose their value and become redundant before their time. Shareholders will lose money. It is true, they will, but it is not really an argument against stranding them if it makes the difference between a liveable and non-liveable planet. Rather, the losers will be an energy elite who have made lots of money from the carbon economy in the past. Being an elite, they are so few in number and the impact overall is small. There is about $4 trillion locked up in fossil-related assets. A lot to us, but small in relation to overall assets in the global economy.

Be prepared to be (re)educated about how money is created, interest rates, why China is cleaner than it may seem, how to stop free-riding, leveraging state borrowing capability, why inflation is good (within reason), contingent carbon tax, sovereign wealth funds, border taxes and why activism is not futile. And trees.

An evening well spent. And no one noticed the food was vegan.