Economists for Future (E4F): In our understanding, unlike the World Inequality Report, the Climate Inequality Report is the first of its kind. What was the motivation behind this report and why do you think considerations of inequality are important for environmental policy?

Philipp Bothe (PB): Yes, it’s true that this report diverges from our previous policy reports. The motivation behind it stems from existing research on climate, inequality, and environmental disparities. Although we conduct some of this research ourselves, there’s no comprehensive synthesis of all the available papers and findings. The project idea had been in consideration for some time and the goal was to consolidate our own work at the Inequality Lab and synthesize existing research on environmental and climate inequality. Funding and other logistical details needed to be sorted out, but the aim was to bring our work and broader research on these topics together. The project received major funding from NORAD, the Norwegian Agency for Development Cooperation, and the UNDP, both of which had specific interests aligning with our focus. The goal was to create a global report on climate inequality, highlighting overlooked aspects in existing research, which was an ambitious plan. Its relevance to policy lies in the fundamental connection between environmental inequality and effective policy formulation. I believe inequality must be at the core of any environmental policy. Environmental policy and inequality are interconnected; you can’t separate them without risking harmful consequences for the most vulnerable. That was the essence of the idea.

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E4F: While talking about inequality the report speaks about “rich”, “poor” and “middle” income groups, but the concept of horizontal inequality and marginalization on the basis of identities like gender, race, or caste do not appear. I wonder what is the possible reason for this uni-dimensional view of inequality?

PB: Our aim was to integrate our own research with papers from various sources to create an extensive report. We focused on a broad, multi-country perspective, emphasizing the disparities between nations regarding emissions responsibility and vulnerability. These inequalities reflect a modern form of environmental injustice rooted in a neocolonial system. This divide between the global North and the global South underscores a racist status quo, a point emphasized multiple times in the report. Therefore, I believe this dimension exists.

The report is heavily data-driven, making it challenging to incorporate certain aspects of vulnerabilities that aren’t universally defined across countries. Despite our focus on economic inequality, we acknowledged the importance of other dimensions, including identity-related factors influencing vulnerability. While our expertise lies in economic inequality data, we included a section on gender vulnerabilities to address this gap and emphasize the presence of other relevant dimensions, even though our primary focus remained on economic inequality.

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E4F: Okay, moving back to the content of this report. Several governments across the world are not hunching towards large-scale restructuring of their economies. Studies like this one provide a reason, that part of the problem is that these countries are also swimming against a tide of inequality. How do you view this duality in terms of priorities?

PB : Right, I believe there’s still a misconception that reducing poverty and fighting climate change are conflicting objectives. Some argue that lifting people out of poverty would lead to increased consumption and, consequently, higher emissions. However, our report challenges this notion. In our findings, we demonstrate that the emission increase linked to large-scale poverty reduction are almost negligible compared to the emissions already occurring at the top end. Consequently, these emissions should be attributed to those responsible for climate change, shouldn’t they?

The myth I’m debunking first is the idea that these two policy goals are inherently contradictory. If we genuinely focus on taxing the wealthier sections and reducing emissions among the top earners, it would create substantial carbon budgets for poverty reduction. This could elevate everyone above a significant poverty threshold. That’s my initial point. Secondly, when discussing adaptation, considering poverty and inequality is essential. It doesn’t make sense to assess vulnerability to climate hazards without accounting for the inequality aspect. We must progress beyond the notion that these goals oppose each other. It’s possible to advance both objectives simultaneously; one need not impede the other.

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E4F: Coming to the knowledge production end within the economics of climate change. What is your view on damage functions, or the equation representing economic output lost each year as a function of average global temperature rise in a world where the only measures available are estimates of global surface average increases in temperature? And, what do you make of the policy prescriptions that come out of such analysis?

PB : To address this question, I believe it’s crucial to ask some preliminary questions. Firstly, one must consider whether it’s appropriate to monetize damages at all. Some argue against it, pointing out the inherent complexities in valuing intangibles like biodiversity loss or human lives. These are valid arguments against economic valuation. However, for those who choose to proceed, the accuracy of damage functions is paramount. Historically, these functions were rudimentary, lacking regional specificity and ignoring crucial factors. But contemporary research is exploring diverse aspects such as temperature variation, precipitation, and extreme events, broadening the scope of damage estimation. Yet, challenges remain, especially in capturing complexities like tipping points and non-linearities.

Secondly, in my opinion, the decision to pursue economic valuation of climate damages hinges on several factors. First, there’s the question of necessity: do we need to do it, and if so, how can we improve upon current methods? Equally important is the purpose behind using these damage functions. If the aim is to optimize the ideal degree of global warming, economists lack the authority to determine this value, especially considering international agreements like the Paris Agreement. We should adhere to those targets rather than proposing potentially harmful deviations.

Therefore, the key questions are: why do we want to do it? Is monetization necessary, and if so, how can we enhance the accuracy of our methods? Furthermore, what will these damage estimates be used for? Addressing these questions sensibly is essential to making an informed choice.

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E4F: What would be your suggestion for collectives like Economists for Future who are trying to mobilize the economics profession so that it helps accelerate the transformation to a just and equitable post-carbon world?

PB : In my view, the field of economics is incredibly diverse. Historically, the neoclassical perspective dominated what was considered mainstream economics, particularly in top journals and prominent academic circles. I agree with your observation in this regard. However, in recent years, the definition of an economist has broadened. Many individuals, though not universally recognized as economists, are making valuable contributions to the field. I’ve noticed a shift in focus towards those working beyond the neoclassical mainstream. Theory has also become less  central; many of my peers, especially in my PhD course, primarily engage in empirical research and are less bound by neoclassical theory.

In my role, I often find that relying solely on neoclassical models limits the solutions I can propose, as it constrains my thinking within a narrow framework. Consequently, many are exploring alternative approaches and collaborating across disciplinary boundaries, including with non-academic experts. Within the broader field of economics, there are individuals actively addressing important issues, and it’s essential to shift our attention towards those who are genuinely committed to solving the problems at hand.

I believe collectives like E4F can play a significant role in redirecting attention from the traditional mainstream to individuals doing work on serious issues. The key is to recognize these scholars and highlight their work. We collaborate with remarkable scholars, including Prof. Jayati Ghosh, whose work has gained recognition. However, there are numerous scholars out there whose work is important, even if the mainstream might not fully appreciate it. Even within the mainstream, there’s a growing recognition of these efforts, although it does sometimes lead to resentment among those who might consider these individuals as unworthy of being called economists.

I see potential for change within economics. The real challenge is how to accelerate this change, a topic that E4F might be more informed about. In my humble opinion, it ideally, involves reshaping mainstream perceptions, even within the established top institutions. I believe the shift is happening, especially among the younger generation. However, the transformative change won’t solely emerge from these established places. There are pivotal connecting points for change, where networks and collaborations can nurture and link like-minded individuals. Working together, we can facilitate these connections.

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