The Tuck/NYU Side Event: “Outcomes, Not Outlays”

By all accounts our side event two days ago was a considerable success.  (Click here to see the panel overview and selected presentation slides.) Although I am not sure exactly how many attended, the mammoth-sized room (the largest of the side event rooms available) was over half full.  Each of the panelists spoke for about ten minutes and, at the beginning, we were lucky enough to have a special guest, Dr. Rajendra K. Pachauri, chair of the Intergovernmental Panel on Climate Change (IPCC) speak.    The panelists were as follows:

Anant Sundaram, Moderator –Tuck School of Business

R. K. Pachauri – TERI

Bryce Rudyk — NYU School of Law

Zoe Tcholak-Antitch – Carbon Disclosure Project

Clifford Polycarp – World Resources Institute

The event began with a few opening remarks from Dr. Pachauri.  He stressed the enormous co-benefits of putting a price on carbon.  Although the immediate financial burden can be considerable to societies, he spoke of the importance of long-term benefits (on top of climate change improvements) such as national security, improved energy efficiency, greater use of renewables, and a wide array of health improvements.  To reap these benefits, however, he stressed the need for viable frameworks that create the proper incentives.  Instead of simply penalizing emitting behaviors, governments and organizations around the world can use positive reinforcement to incentivize behavior.  Such a system would allow corporations to monetize “being green,” and, thus, make them more likely to behave in this way. 

Along the lines of creating proper incentives, Dr. Pachauri gave an example of how economics can be the best means of motivating behavior while still bringing considerable non-economic benefits.  Through the use of solar technology, artificial light can be brought to areas without electricity.  A profit-seeking entrepreneur in a developing nation could do this by purchasing solar lanterns, charging them during the day, and then renting them out at night to members of the community.  If done properly, this could be a positive NPV project with an extremely worthy and humanitarian goal.       

In his concluding remarks to the panel, Dr. Pachauri said that when considering these facets of policy it is extremely important to focus on outcomes, instead of outlays.  While I certainly agree with the spirit of this argument, I found myself wondering if the time constraints of climate change would really allow us to fully use results as a means of measuring success and choosing frameworks.  It seems to me that progress, particularly in the early stages, can and should be measured according to improvements in well-meaning policy and our best guess as to what will bring the most good.  It is not always easy to measure changes in outcomes each month or even each year, particularly in an area such as climate change.          

Professor Sundaram’s remarks tracked very closely with Dr. Pachauri’s.  His opening question was why there are not more business schools at the conference and why the private sector seems underrepresented.  I believe this is an extremely relevant question and found myself wondering why others had not asked it too.  As Professor Sundaram pointed out, at the end of the day, countries do not pollute, companies and consumers do.  This fact makes the issue of climate change inherently related to businesses and the private sector.  Corporations are the ones that will finance R&D to improve technology.  Thousands of companies (such as 3M that has drastically reduced emissions) are trying to get in front of the issue.  The question then becomes what can policy do to help business and not the other way around. 

The current system seems to focus most heavily on punishments for bad behavior (emitting excessively).  Professor Sundaram’s view, however, was that while punishments may ultimately be the most efficient system, rewards for emission reductions can be just as effective and more feasible in the short-run.  If companies can monetize the benefits of reducing emissions, they will be more likely to comply and drive the innovation to reduce emissions still further.


One Response to The Tuck/NYU Side Event: “Outcomes, Not Outlays”

  1. karstenbarde says:

    Alex, I like your question about whether focusing exclusively on outcomes allows for the speed and magnitude of action needed today.

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