The Paris Climate Change Agreement: Beginning of “The Economics of the Coming Spaceship Earth”?

Edward B. Barbier

Edward B. Barbier is the John S. Bugas Professor of Economics at the University of Wyoming

Fifty years ago, in March 1966, Kenneth Boulding presented his landmark essay, “The Economics of the Coming Spaceship Earth” at a workshop in Washington, D.C.  With its vision of the “spaceship earth,” this short treatise has had a profound influence on thinking about the global economy and sustainability over the past half century.

In the most famous passage, Boulding describes the open economy of the past with its seemingly unlimited resources and contrasted it with the closed economy of the future.  He wrote:

I am tempted to call the open economy the ‘cowboy economy,’ the cowboy being symbolic of the illimitable plains and also associated with reckless, exploitative, romantic, and violent behavior, which is characteristic of open societies. The closed economy of the future might similarly be called the ‘spaceman’ economy, in which the earth has become a single spaceship, without unlimited reservoirs of anything, either for extraction or for pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy.

The essay was influential for two reasons.

First, as Boulding emphasized in his opening sentence, creating a more sustainable economy requires humankind rethinking its relationship with nature: “We are now in the middle of a long process of transition in the nature of the image which man has of himself and his environment.”  Boulding recognized that this change in worldview would be difficult, as “the image of the frontier is probably one of the oldest images of mankind, and it is not surprising that we find it hard to get rid of.”

Second, as an economist, Boulding recognized that the main impetus for change must occur in the basic production and consumption relationships of modern economies: “The closed earth of the future requires economic principles which are somewhat different from those of the open earth of the past.”

These central messages of Boulding’s essay are still relevant to contemporary debates over how best to reconcile global economic development with environmental sustainability.

Writing in 1966, Boulding could only optimistically predict that the “frontier” view of the environment as “unlimited reservoirs of anything, either for extraction or for pollution” would change to the “spaceship” view that respects environmental limits on economic expansion. Fifty years later, there is increasing evidence that this paradigm shift is occurring. For one, some scientists are calling for a global economy that respects “planetary boundaries”. Such boundaries could establish the initial limits of a “spaceship earth”.

Then there is the breakthrough Paris climate change agreement in December 2015. Nearly 200 countries approved a collective framework for limiting global temperature rise to less than 2°C, with each country adopting long-term plans to reduce greenhouse gas (GHG) emissions so that by 2050 there will be no net emissions worldwide.

However, as the world increasingly recognizes the need to shift from an open to a closed economy, the second message of Boulding’s essay becomes even more pertinent. What are the new “economic principles” that will help guide the global economy to a more sustainable development path?

This question still needs to be resolved, if the transition to a more sustainable economy is to succeed.

Economists have long maintained that, if the world’s economies are to reconcile environment and development goals, there is a need for national governments and the international community to adopt market-based incentives, improved environmental regulations, payments for ecosystem services, and other economic instruments to reduce excessive environmental degradation and encourage more sustainable and efficient uses of natural resources and ecosystems. As I argued previously in an article for Nature, a wide range of possible global funding sources for environmental management and conservation initiatives are feasible, including financial transaction taxes, international financing facilities, sovereign wealth funds, GHG emissions, and taxes on global arms, tobacco and fuel trade.

But too often, international talks on global environment and development issues have focused on priorities for action or setting targets, and avoided the more difficult task of adopting economic policies and instruments that are necessary to create incentives to achieve these goals or to raise revenues for financing.

Take the Paris climate change agreement. As the French Nobel Prize economist Jean Tirole has commented, “Carbon pricing, recommended by the vast majority of economists and many policymakers, but a no-starter for Venezuela and Saudi Arabia, was light-heartedly discarded by the negotiators. This seriously jeopardizes the achievement of the climate target.”

Setting targets, such as the greenhouse gas emission limits that countries agreed at the Paris talks, are a necessary step to creating the new “economic principles” of “spaceship earth” that Boulding advocated fifty years ago. But agreeing such emission targets, or any other “planetary boundaries” for other forms of environmental degradation, is not sufficient to achieve sustainability unless they are accompanied by price signals that will provide the correct incentives achieving such targets.  This is certainly true with respect to a carbon price.  As Tirole argues:

A universal carbon price is indeed essential to meet the 1.5 or 2 °C goal. A carbon pricing system differentiated country by country would not only open up a Pandora’s box (who pays what?), but above all would simply be environmentally unfriendly. Further rise in emissions will come from emerging and poor countries; under-pricing carbon in these countries will prevent the achievement of the climate goal. All the more that setting a high carbon price in developed countries will push GHG emitting productions to relocate to countries with a low carbon price, thus obliterating the efforts of rich countries.

The Paris Climate Change Agreement suggests that we are much closer to the “economics of the coming spaceship earth” than we were fifty years ago when Boulding first wrote his essay. Let’s hope that we do not have to wait another half century before such “economic principles” are fully realized.

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