Lee, It would help in this discussion to provide a clear definition of "moral hazard" and then say why or why not that definition is relevant in this context.
If you look on the web, you can get quite a range of definitions: http://www.google.com/search?q=define%3A+moral+hazard The first definition that comes up is: * **Moral Hazard (economics) the lack of any incentive to guard against a risk when you are protected against it (as by insurance)* The UN Capital Development Fund defines it as follows: *Moral Hazard arises from the incentive of an agent holding an asset belonging to another person to endanger the value of that asset because the agent bears less than the full consequences of any loss.* So, the question is "Why are these definitions not relevant to climate intervention?" By the way, most but not all definitions of "moral hazard" do not imply that "moral hazard" has anything to do with morality. Climate intervention seeks to diminish risk and not simply transfer risk, which is one distinguishing factor. Here is a little parable: *Let's say that people think you should change farming practices to slow runoff to decrease flooding downstream. Let's further say that people downstream build dikes to prevent flooding despite poor upstream land use practices. Would we say that a *moral hazard* of building dikes is that it will relieve pressure on people living upstream to improve their land use practices (which could have other co-benefits, such as limiting nutrient runoff)? * [The analogy is that CO2 emission reduction gets at fundamental cause of problem, has other co-benefits (e.g. w.r.t. ocean acidification) but that climate intervention may really reduce risk and not just transfer risk.] Anyway, Lee, it would be nice if you would provide what you think is a good definition for "moral hazard" and then clearly explain why you think it does not apply in this case. Best, Ken PS. David Keith may want to chime in, as I think he was one of the first to use "moral hazard" in this context and now wishes he had been more precise with his language. ___________________________________________________ Ken Caldeira Carnegie Institution Dept of Global Ecology 260 Panama Street, Stanford, CA 94305 USA +1 650 704 7212 [email protected] http://dge.stanford.edu/labs/caldeiralab @kencaldeira On Sat, Sep 18, 2010 at 8:56 AM, Lane, Lee O. <[email protected]> wrote: > Dear Josh, > > > > I would suggest that in the future we would all be better off without the > term "moral hazard". Moral hazard, as I suspect you know, is a kind of > market failure. The concept is perfectly useful for describing a class of > problems that arise in insurance markets and other kinds of risk-spreading > contracts. It does not, I would argue, fit the case of climate engineering > (CE) at all well. > > > > The relative priority of climate engineering and GHG control is a matter of > public policy. It does not involve insurance markets or contracting. The > asymmetric knowledge, so typical of moral hazards, does not obtain. > > > > In fact, if CE works and does not cause unacceptable side effects, it would > lower the expected damage from an adding a ton of CO2 to the atmosphere. As > a result, optimal carbon tax rates or emission allowance prices would fall, > and the optimal pace of controls would slow. > > > > True, even if CE works well, it may exhibit diminishing marginal returns, > and it does not combat ocean acidification. Thus, controls retain some > value; so does adaptation. The three approaches, as Scott Barrett has often > noted, are* imperfect* substitutes. (Doing more of one implies doing less > of the others, but there is a limit to how far that substitution can > stretch.) Each of the three is likely to encounter rising marginal costs; > hence, relying over-much on any one of them will lower over-all cost > effectiveness. > > > > In this context, the term moral hazard adds nothing but confusion. Its > misuse can be taken to imply that sole reliance on GHG control is somehow > the correct response. Indeed the naïve may take it that controls are the > only “moral” response. The more we think, speak, and write in these > evocative but misleading terms the harder it becomes to see that climate > policy should entail finding the most cost beneficial *mix* of strategies > for dealing with a compound challenge in the face of uncertainty. > > > > Josh, I suspect that you know all of this; indeed, you could probably write > it more articulately than I have. My guess is that you use the term merely > as a convenience. Its misuse has seemed to take root in the debate about CE. > Maybe it is too late to expunge it. Still, I would urge that we at least > avoid sowing further confusion—even if it involves taking a little extra > trouble to explain. > > > > Best regards, > > > > Lee Lane > > > > > > > > > > > > One of the more interesting findings pertains to the "moral hazard" > argument against geoengineering, that is, people will embrace > geoengineering as an excuse to avoid emissions reductions, and current > levels of fossil fuel consumption will persist if not increase. Moral > hazard has emerged as one of the principal arguments against climate > engineering, despite the fact that geoengineering advocates generally > support aggressive mitigation as the preferred option, and are quick > to note the limitations of specific strategies, such as continued > ocean acidification and the so-called "termination problem" in the > case of stratospheric aerosol injections. > > Evidence from the public dialogue summarized in the NERC report > indicates that participants viewed mitigation and geoengineering as > complementary policies, not as mutually exclusive alternatives. > Stakeholders saw a link between geoengineering and emissions controls, > and preferred a suite of mitigation and geoengineering measures to > reliance on any single approach. "This evidence is contrary to the > 'moral hazard' argument that geoengineering would undermine popular > support for mitigation or adaptation," notes the report. While this > study represents only one set of empirical data gathered in one > particular sociocultural context, it is to my knowledge the first time > the moral hazard argument has been tested, and demonstrates little > support for this proposition. > > Josh Horton > [email protected] > http://geoengineeringpolitics.blogspot.com/ > > > On Sep 9, 10:45 am, Emily <[email protected]> wrote: > > best wishes, > > Emily. > > > > Dear Colleague, > > > > NERC has published the final report of Experiment Earth? , our public > > dialogue on geoengineering. It can be found at: > http://www.nerc.ac.uk/about/consult/geoengineering.asptogether with a > > short leaflet summarising the findings and recommendations from the > report. > > > > The latest issue of NERC's Planet Earth magazine also contains an > > article about the public dialogue, which can be found here: > http://planetearth.nerc.ac.uk/features/story.aspx?id=744 > > > > Regards, > > > > Peter > > > > Peter Hurrell > > > > Stakeholder Liaison Officer | Policy and Partnerships Team > > > > Natural Environment Research Council (NERC) > > > > Putting NERC science to use: find out more through NERC s Science > > Impacts Database <http://sid.nerc.ac.uk/> > > > > -- > > This message (and any attachments) is for the recipient only. NERC > > is subject to the Freedom of Information Act 2000 and the contents > > of this email and any reply you make may be disclosed by NERC unless > > it is exempt from release under the Act. 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