Are You Really Ready to Take One for Climate Change?

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August 13, 2018

3 monkeys see no evil hear no evil

There is no doubt that any push to rapidly tackle climate change would disrupt the global energy economy. It would also affect the business models of millions of companies tied into that global system. Advocates for climate action often try to portray the low carbon transition required to tackle climate change as a societal and business “win-win.” In the long run, that might be correct. However, there would be lots of potential losers along the way.

Loss Aversion Responses to the Low Carbon Transition

Not surprisingly, potential losers are not keen to “take one for climate change.” We can see that in the business-led opposition to climate change policy over the last two decades. However, what I call “loss aversion” responses to a rapid low carbon transition characterize the thinking and actions of more than just the coal and oil sectors. Loss aversion is a factor in how most of us would respond to policies required to actually “solve” climate change.

Consider the following statements reflecting loss-aversion:

  • “As long as it doesn’t interfere with my freedom of choice in buying an SUV, I’m all in with solving climate change!”
  • “As long as it doesn’t interfere with my freedom to take global vacations, I’m all in with solving climate change!”
  • “As long as I can still live in a 5,000 square foot house,  I’m all in with solving climate change!”
  • “As long as it doesn’t lower my investment returns, I’m all in with solving climate change!”

Many similar statements help explain the contradiction between public opinion polls suggesting high levels of public concern about climate change and the ambivalence of the American public toward specific climate policies (and voting for representatives who would enact such policies). As you get closer to the impacts of potentially disruptive climate policies, it becomes more obvious that we can’t make that omelet without breaking a lot of eggs — and most of us have a stake in some of those eggs.

This explains why the climate advocacy literature is full of discussions about how you will be able to buy your dream car in an all-electric version, airplanes will run on carbon-neutral electricity and biofuels, our homes can be “net zero energy,” and you don’t have to give up investment profits in order to invest in a climate-friendly portfolio. It’s all an effort to avoid triggering the loss aversion responses that can create barriers to climate action.

No One is Immune

I had not realized just how pervasive such loss aversion responses could be until engaging an influential environmental NGO on how the Climate Web could help the NGO disseminate better actionable knowledge on climate change to its members.

The conversation was structured around this quote of Woodrow Wilson: “There is no idea in our heads that has not been worn shiny by someone else’s brains.” Our pitch was that the Climate Web, by providing easy access to the universe of good ideas already out there on climate change, could help the NGO’s membership become more effective in promoting climate change progress. It would reduce the need for recreating the same knowledge wheels and allow climate advocates to come up to speed much more rapidly on complex topics. It would help them retain information they otherwise would have forgotten in a few weeks.

I neglected to anticipate the power of the NGO’s loss aversion response. “If we make better information available to our members, it will undercut the value they see in the webinars and videos we provide them now as a membership service.” In other words:

“As long as it doesn’t interfere with our current business model or services, I’m all in on solving climate change!”

This is a stark testament to loss aversion, and something you might expect from coal and oil companies. It’s a bit of a shock coming from an environmental NGO with the stated mission of tackling climate change.

It should make us really ask ourselves: “Are we really ready to take one for climate change?”

About the author 

Mark Trexler

Mark has more than 30 years of regulatory and energy policy experience. He has advised clients around the world on climate change risk and risk management. He is widely published on business risk management topics surrounding climate change, including in the design and deployment of carbon markets. Mark has served as a lead author for the IPCC and holds advanced degrees from the University of California at Berkeley.

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