Research

Nobel laureate on climate change: We don't need to wait for an elusive top-down solution

Elinor Ostrom, the 2009 recipient of the Nobel Prize in Economic Sciences, told the audience at the Economic Club of Phoenix Luncheon that there's ample evidence to prove that polycentric, or multilevel, approaches — even relatively easy fixes that can be implemented by local communities, businesses, and individuals — can begin to address the crises.

2011-03-15

While the world waits for international agreement on solutions to global climate change, the risk of calamity from weather variability and extreme events builds. In fact, we're already experiencing some of those risks. But that ultimate top-down approach, complete with consequences for offenders, is not the only way to go, and is probably not even the most effective.

Elinor Ostrom, the 2009 recipient of the Nobel Prize in Economic Sciences, is a research professor at Arizona State University's School of Human Evolution and Social Change, and is the founding director of the Center for the Study of Institutional Diversity.

She told the audience at the Economic Club of Phoenix Luncheon that there's ample evidence to prove that polycentric, or multilevel, approaches — even relatively easy fixes that can be implemented by local communities, businesses, and individuals — can begin to address the crises.

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Attention paid to climate change ebbs and flows. It peaks when government leaders meet in Copenhagen or Cancun to try to agree on action to combat global warming. Or when an extreme weather event — Hurricane Katrina or last winter's blizzards — captures attention. But what is, really, being done to slow the rate at which our earth warms?

Not much — certainly not enough — according to Elinor Ostrom, who spoke yesterday to the Economic Club of Phoenix. Ostrom is founding director of the Center for the Study of Institutional Diversity at Arizona State University and recipient of the 2009 Nobel Prize in Economic Sciences. "I'm quite disturbed by the way people are thinking about climate change," she said.

"My big concern is the notion that we have to wait until 'those guys' at the international level make a decision about how to combat climate change."

Ostrom doesn't see that happening anytime soon. "There are some interesting proposals out there for dealing with climate change. I happen to think that cap and trade makes very good sense. You put a cap on how much people can emit (and bring that cap down slowly) then allow emitters to trade their emissions credits. Greenhouse gas taxes are another option.

"We have huge debates about which of these will work," Ostrom said. But those debates "up there" — at the international level — aren't really progressing.

But the stakes are high, and the clock is ticking. "It's a risk curve that we're dealing with. The more emissions we have, the higher the risk of major disasters. And we're already seeing some of them. But even if you can only get the risk down a bit, you're still in better shape than if you do nothing."

Climate change is not just warming, Ostrom reminded the audience, but also weather variability and extreme weather events. "I wouldn't want to live on the coast of the Netherlands in 10 years," she said. "Whole islands are going to disappear. The threat is massive."

Collective action theory: Are global treaties really the only way?

Clearly, something must be done. In the absence of a global climate change policy, however, what is feasible? And among those options, what will make a difference? Ostrom says that according to conventional theory, not much.

"The way that conventional collective action theory interprets this is that there are people who have interests in energy consumption — all of us. We all want to take as much energy as we can — since it's a common pool resource — and there are no ways of getting us to stop, except in the form of 'the' solution coming from on top," Ostrom explained.

According to this conventional theory, one reason we're not likely to band together in collective action to mitigate greenhouse gas emissions, is the problem of the free rider. If action isn't mandated by a group with enforcement power, such as a government, then individuals can reap the benefits of others' action without doing any work themselves. They can ride for free.

But free riding in itself isn't the problem, Ostrom explains. Even if some individuals free ride, as long as the others take action — to limit their greenhouse gas emissions, for example — then the entire group is still better off than with no action. According to this theory, the mitigating factor is our reluctance to be a "sucker," as Ostrom put it. If others can free ride and still benefit, then those who do all the work are "suckers." So in the end, no one acts.

But when no one acts, everyone is worse off, she pointed out. So as collective action theory goes, the only answer in cases of shared resources (like our climate) is external intervention, as in the form of a binding global agreement. That external body makes a policy mandating action; non-action is met with consequences that are enforced.

Effective collective action without the big stick

Ostrom rejects many of the precepts of conventional collective action theory. She has found many examples of groups solving the collective action problem without intervention from "up there."

"Think about it inside a firm, with a team of workers who all need to contribute to complete a project. There might be free riders. But you can't pay and monitor everyone by the minute. So firms that are successful have built trust. They say, 'if we work together we can make a better profit and all of us will be better off.'"

Ostrom offered a number of factors that enable people to work together collectively. Some of the most important: face-to-face collaboration, trust in one another, and a sense of the long term. "You have to get people to perceive a stake in the future that they can impact,   and give them the ability to monitor each other," she said.

"So clearly we need to change our assumptions behind our basic theory of collective action," Ostrom said. To do that, she turned to new developments in behavioral theory, which demonstrates that individuals are not always focused on short-term benefits.

The way forward is a polycentric approach

It's a commonly accepted notion that big organizations (governments, intergovernmental organizations, international associations) are best equipped to deal with big problems like climate change. But that's not always the case, Ostrom said. "Actually, the optimal approach for dealing with big problems — like climate change — is to engage large, medium, and small organizations together."

That multilevel kind of approach is what Ostrom refers to as "polycentric." It's an approach she's been working on since the early 1960s. In Chicago, for example, Ostrom found that a polycentric approach to criminal justice was the most effective. "The system worked best with a large-scale crime lab, training facility, dispatching center, and jail in combination with small-scale patrol units."

Similarly, Ostrom says that the approach to coping with climate change must be polycentric. That doesn't mean she rejects large-scale measures, but rather looks to them in combination with smaller and medium-scale measures. After all, she said, "International and national policies require local and regional actions and enforcement."

Ostrom added that reducing our greenhouse gas emissions needn't be a monumental effort. She listed some relatively simple ways that a household or business could significantly reduce its emissions: weatherization, low-flow showerheads, efficient water heaters, turning down the temperature on the water heater, approved appliances, fuel-efficient vehicles, and thermostat set-backs (for when no one is home).

What's more, we need to begin thinking about the "hidden" costs of energy consumption — what Ostrom called "nested externalities." She explained, "Not only does my driving generate greenhouse gas emissions, but I'm paying for gas, and I'm not exercising (I could have walked or biked). So there are a number of hidden costs for families and businesses associated with the use of energy."

And there are a number of "hidden" benefits associated with using less energy. Ostrom said, "If I were to bike instead of drive, for example, I would save money and I would improve my health — in addition to reducing the amount of greenhouse gases I emit."

Collective action toward reductions in greenhouse gas emissions works at the community level, too. Ostrom recounted the example of the Sacramento Municipal Utility District, a non-profit utility, which was facing the possibility of building a new power plant (a very expensive proposition).

In an effort to reduce demand first, the utility started comparing each household's energy usage with a random sample of other households in the same neighborhood and noting, on the customer's bill, whether that customer was among the "inefficient" or "efficient" households. "Then for a while they put a big smile next to 'efficient' and a big frown next to 'inefficient,' though some people didn't like that too much," Ostrom said.

What really got consumers to change their behavior was when the utility showed each consumer how his or her household compared with others.' Consumers saw their energy consumption ranked against "efficient neighbors" and "all neighbors." And they did change their behavior — they used less energy. Even the most efficient households became more efficient. "It's the feedback that really worked," Ostrom explained.

"So instead of thinking of one global remedy, what we need to be doing is applying this notion of polycentricity to cope with climate change," Ostrom said. Her chief message: the time to act is now, and we can all make a difference. "We don't always need someone at the top telling us what to do. Let's not wait for a global solution."

Bottom line

• Many proposals for dealing with climate change on a global level do exist. But deciding which to adopt and then working out the details on a global level will be a big challenge.
• Conventional collective action theory says that global treaties are the only way to combat climate change.
• But the empirical evidence doesn't support conventional collective action theories.
• So, in fact, global treaties are not the only way to combat climate change. Instead, the answer is a polycentric approach with action at the individual, community, regional, national, and global levels.
• Productive action to reduce greenhouse gas emissions can be taken at the household and community levels.
• Facing a global climate crisis, the time to act is now.

Economics Economic Club of Phoenix ECP