Moral Hazard Study

[Wil Burns]

Talbot M. Andrews, et al., Anticipating moral hazard undermines climate mitigation in an experimental geoengineering game, 196 Ecological Economics, June 2021

 

https://www.sciencedirect.com/science/article/abs/pii/S0921800922000830?dgcid=author

Abstract

Geoengineering is sometimes touted as a partial solution to climate change but will only be successful in conjunction with other mitigation strategies. This creates a potential for a “moral hazard”: If people think geoengineering alone will mitigate climate change, they may become overly optimistic and reduce support for other necessary mitigation efforts. We test this in a series of economic games where players in groups must prevent a simulated climate disaster. One player, the “policymaker,” decides whether to implement geoengineering. The rest are “citizens” who decide how much to contribute to incremental mitigation efforts. We find that citizens contribute to mitigation even when the policymaker uses geoengineering. Despite this, policymakers expect that citizens will engage in moral hazard. As a consequence, policymakers do not use geoengineering even though everyone would be better off if they did so. Anticipating moral hazard undermines mitigation even though moral hazard itself does not.

 

 

 

WIL BURNS Visiting Professor Environmental Policy & Culture Program Northwestern University   Email: william...@northwestern.edu   Mobile: 312.550.3079   1808 Chicago Ave. #110 Evanston, IL 60208 https://epc.northwestern.edu/people/staff-new/wil-burns.html   Want to schedule a call? Click on one of the following scheduling links:  60-minute phone call: https://calendly.com/wil_burns/phone-call 30-minute phone call: https://calendly.com/wil_burns/30min 15-minute phone call: https://calendly.com/wil_burns/15min 60-minute Zoom session: https://calendly.com/wil_burns/60min 30-minute Zoom session: https://calendly.com/wil_burns/30-minute-zoom-call 15-minute Zoom session: https://calendly.com/wil_burns/15-minute-zoom-call   I acknowledge and honor the Ojibwe, Potawatomi, and Odawa, as well as the Menominee, Miami and Ho-Chunk nations, upon whose traditional homelands Northwestern University stands, and the Indigenous people who remain on this land today.

 

 

[Greg Rau]

So believing in CDR moral hazards is hazardous. Questions?

Greg

Sent from my iPhone

On Apr 15, 2022, at 1:43 PM, Wil Burns <w...@feronia.org> wrote:



Talbot M. Andrews, et al., Anticipating moral hazard undermines climate mitigation in an experimental geoengineering game, 196 Ecological Economics, June 2021

 

https://www.sciencedirect.com/science/article/abs/pii/S0921800922000830?dgcid=author

Abstract

Geoengineering is sometimes touted as a partial solution to climate change but will only be successful in conjunction with other mitigation strategies. This creates a potential for a “moral hazard”: If people think geoengineering alone will mitigate climate change, they may become overly optimistic and reduce support for other necessary mitigation efforts. We test this in a series of economic games where players in groups must prevent a simulated climate disaster. One player, the “policymaker,” decides whether to implement geoengineering. The rest are “citizens” who decide how much to contribute to incremental mitigation efforts. We find that citizens contribute to mitigation even when the policymaker uses geoengineering. Despite this, policymakers expect that citizens will engage in moral hazard. As a consequence, policymakers do not use geoengineering even though everyone would be better off if they did so. Anticipating moral hazard undermines mitigation even though moral hazard itself does not.

 

 

 

WIL BURNS Visiting Professor Environmental Policy & Culture Program Northwestern University   Email: william...@northwestern.edu   Mobile: 312.550.3079   1808 Chicago Ave. #110 Evanston, IL 60208 https://epc.northwestern.edu/people/staff-new/wil-burns.html   Want to schedule a call? Click on one of the following scheduling links:  60-minute phone call: https://calendly.com/wil_burns/phone-call 30-minute phone call: https://calendly.com/wil_burns/30min 15-minute phone call: https://calendly.com/wil_burns/15min 60-minute Zoom session: https://calendly.com/wil_burns/60min 30-minute Zoom session: https://calendly.com/wil_burns/30-minute-zoom-call 15-minute Zoom session: https://calendly.com/wil_burns/15-minute-zoom-call   I acknowledge and honor the Ojibwe, Potawatomi, and Odawa, as well as the Menominee, Miami and Ho-Chunk nations, upon whose traditional homelands Northwestern University stands, and the Indigenous people who remain on this land today.

 

 

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[David Hawkins]

Climate disruption is a socio-political problem, as is moral hazard. Both require a socio-political strategy to prevent. 

To view this discussion on the web visit https://groups.google.com/d/msgid/CarbonDioxideRemoval/2839AF71-2331-46C7-B9F7-6B93FF07B314%40sbcglobal.net.

[Dan Miller]

Yes, believing CDR is a moral hazard is a moral hazard that will result in mass death.

The idea of CDR being a moral hazard is rooted in the idea that we will not take climate action seriously and we will politely ask fossil fuel companies to please reduce their emissions, if it’s not too much of a bother.

Of course, we could put a price on carbon and use clean energy standards to force the phase out of fossil fuels. We could then also implement CDR with no risk of “moral hazard”.

See my Global Climate Action Plan for a set of policies that reduce emissions *and* removes CO2 from the atmosphere.

Of course, so far, we are not taking climate action seriously… and that is a moral hazard!

Dan

[Chris Neidl]

Let's just coin it: The Moral Hazard Hazard.

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On Apr 16, 2022, at 9:34 AM, Greg Rau <gh...@sbcglobal.net> wrote:

So believing in CDR moral hazards is hazardous. Questions?

Greg

Sent from my iPhone

On Apr 15, 2022, at 1:43 PM, Wil Burns <w...@feronia.org> wrote:



Talbot M. Andrews, et al., Anticipating moral hazard undermines climate mitigation in an experimental geoengineering game, 196 Ecological Economics, June 2021

 

https://www.sciencedirect.com/science/article/abs/pii/S0921800922000830?dgcid=author

Abstract

Geoengineering is sometimes touted as a partial solution to climate change but will only be successful in conjunction with other mitigation strategies. This creates a potential for a “moral hazard”: If people think geoengineering alone will mitigate climate change, they may become overly optimistic and reduce support for other necessary mitigation efforts. We test this in a series of economic games where players in groups must prevent a simulated climate disaster. One player, the “policymaker,” decides whether to implement geoengineering. The rest are “citizens” who decide how much to contribute to incremental mitigation efforts. We find that citizens contribute to mitigation even when the policymaker uses geoengineering. Despite this, policymakers expect that citizens will engage in moral hazard. As a consequence, policymakers do not use geoengineering even though everyone would be better off if they did so. Anticipating moral hazard undermines mitigation even though moral hazard itself does not.

 

 

 

<image001.jpg>

To view this discussion on the web visit https://groups.google.com/d/msgid/CarbonDioxideRemoval/2839AF71-2331-46C7-B9F7-6B93FF07B314%40sbcglobal.net.

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[Robert Chris]

“Moral hazard” has travelled a long way since its origins in the insurance sector where for much of its life it referred to perfectly moral behaviour, one that anyone who even today buys insurance, still does – we occasionally behave slightly less carefully because insurance protects us from loss and damage if the risk crystallises.  Since that incremental risk is priced into the cost of the insurance and is shared across the entire pool of those enjoying the benefits of the insurance, everyone wins. Following the 2008 financial collapse it acquired a pejorative sense, when the incremental risk had become huge but those taking those risks were entirely protected from the downside by governments regarding the some banks as 'too big to fail' and bailing them out with public funds.  Yet the risk takers still enjoyed their fat bonuses.  The essence of moral hazard is that someone is benefiting from taking extra risk while others pick up all or most of the tab if it goes wrong.  Whether moral hazard is moral or immoral depends on the balance of risk and benefit and how they're shared.

Not taking climate change seriously is not in itself a moral hazard.  Those on this listserv mostly take it very seriously, but I suspect that the great majority of the almost 8bn people currently alive on this planet are too busy dealing with the daily routine of staying alive and caring for their loved ones to devote too much energy to climate change.  They are not guilty of immoral moral hazard. 

If references to moral hazard are intended to make people wake up to their climate change responsibilities, it should be reserved for those who know how serious it is but prefer to increase the risks from climate change in pursuit of their selfish interests, than reduce them by deploying their power for the wider good.  There are plenty to whom this applies. I don’t need to list them here but they range all the way from some of the world's largest corporations and the politicians in their pockets, down to individuals who persist with egregious overconsumption.

When using moral hazard to highlight bad behaviour, be clear about whom the guilty are, be specific about what they’re doing that they shouldn’t, how it serves their interests and harms others,  and what they should be doing to atone for their sins.

CDR (and more generally, greenhouse gas removal (GGR)) is now a necessary component of any effective response to climate change.  GGR properly implemented would reduce climate change risks.  It's not a belief that GGR is a moral hazard that makes it a moral hazard, rather it's the cynical use by some of GGR as an excuse to slow the transition away from fossil fuels, and thereby increase those risks. Naming and shaming them might be more effective if they had any shame.

See a short piece on this topic at Illuminem - https://illuminem.com/energyvoices/35e225de-11e0-4899-aeed-77bba5c33b5a.

Robert Chris

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On Apr 16, 2022, at 9:34 AM, Greg Rau <gh...@sbcglobal.net> wrote:

So believing in CDR moral hazards is hazardous. Questions?

Greg

Sent from my iPhone

On Apr 15, 2022, at 1:43 PM, Wil Burns <w...@feronia.org> wrote:



Talbot M. Andrews, et al., Anticipating moral hazard undermines climate mitigation in an experimental geoengineering game, 196 Ecological Economics, June 2021

 

https://www.sciencedirect.com/science/article/abs/pii/S0921800922000830?dgcid=author

Abstract

Geoengineering is sometimes touted as a partial solution to climate change but will only be successful in conjunction with other mitigation strategies. This creates a potential for a “moral hazard”: If people think geoengineering alone will mitigate climate change, they may become overly optimistic and reduce support for other necessary mitigation efforts. We test this in a series of economic games where players in groups must prevent a simulated climate disaster. One player, the “policymaker,” decides whether to implement geoengineering. The rest are “citizens” who decide how much to contribute to incremental mitigation efforts. We find that citizens contribute to mitigation even when the policymaker uses geoengineering. Despite this, policymakers expect that citizens will engage in moral hazard. As a consequence, policymakers do not use geoengineering even though everyone would be better off if they did so. Anticipating moral hazard undermines mitigation even though moral hazard itself does not.

 

 

 

<image001.jpg>

To view this discussion on the web visit https://groups.google.com/d/msgid/CarbonDioxideRemoval/2839AF71-2331-46C7-B9F7-6B93FF07B314%40sbcglobal.net.

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[Andrew Lockley]

https://journals.sagepub.com/doi/abs/10.1177/1461452916659830

My linked paper discusses the origins of the term in insurance - which is seemingly misunderstood extensively among many of the academics using it. Tl;Dr It's not one thing, but two. Moral hazard is malfeasance, morale hazard is recklessness. The use of "moral hazard" to describe recklessness or incaution is erroneous. This paper has been cited frequently, but incorrect use of the term persists, to my frustration. 

Andrew 

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[Ron Baiman]

Hi Will,

As Andrew (as he notes) posted this paper to the Geoengineering list earlier and it was discussed a bit on the HPAC List, and is relavant to both Geoengeering and CDR I'm cross-posting across a number of lists.

Quoting from the paper (p. 2);

"Across two experiments, we found no evidence people engaged in
moral hazard. In both experiments, players were willing to invest the
same amount in incremental mitigation regardless of whether the policymaker
used geoengineering (and regardless of whether we even
mentioned the possibility of geoengineering in the experiment). However,
we found people engaged in moral hazard anticipation: Policymakers
were unwilling to use geoengineering when it had a low chance
of success, despite the fact there was no way geoengineering could
backfire. Using simulations, we also show that moral hazard anticipation
undermined group success, decreasing the probability groups
averted disaster. In sum, we found that people believe others will engage
in moral hazard in response to geoengineering, even when they themselves
do not."

The paper is interesting, but like all such papers it's conclusion is very much dependent on the assumptions used to set up the simulation game. In this case "geoengineering" is described (p. 3) as a 1 or 0 option with a certain probability ( 10%, 30%, 50%, 70%, 90%) of complete success, and with no economic or climate/environmental downside if it fails - as described above - no chance that it could "backfire".  Thus, though CDR is included as "geoengineering" in the intro to the paper, in practice what it addresses is "free-driver" all or nothing global SAI.

The paper is interesting as it raises the possibility that policymaker concern about the possibility of "moral hazard" from implementing SAI could increase the risk of climate disaster even if actual "moral hazard" is not signigicant among citizens. 

I would add that this conclusion could be even more robust if other forms of incremental, localized, and not 1 or 0, forms of "direct cooling"  that are similarly relatively low-cost compared to reducing and removing GHG's (emissions reduction and CDR) were included as possibilities.

(Here's a very short and incomplete summary of some of these other methods from a pre-print of a forthcoming paper (https://www.cpegonline.org/post/our-two-climate-crises-challenge ):

"Some of the proposed methods are: Marine Cloud Brightening (MCB), Mirrors for Earth’s Energy Rebalancing, Wind driven sea water pumps, Surface Albedo Modification (formerly Floating Sand), Iron Salt Aerosol, Stratospheric Aerosol Injection (SAI), Floating Sand, and Cirrus Cloud Thinning (CCN), see Baiman 2021, p. 615-616). Mirrors for Earth’s Energy Rebalancing (MEER) would offer local and regional cooling solutions based on deployment of arrays of mirrors on the earth’s surface[1], and wind driven sea water pumps could increase Arctic winter ice formation, slowing summer ice melt and methane release (Desch et 2017)."

---

[1] https://www.meerreflection.com/home )

As in this case the possibility of significant economic or climate/environmental unintended consequeces could in reality (not just as an idealized game theory assumption) be more easily discounted.

I would add to the list above the possibility of incremental SAI in early spring in polar regions rather then "one zero, all or nothing global SAI" per this (excellent Andrew) podcast: https://podcasts.apple.com/us/podcast/arctic-sai-walker-lee/id1529459393?i=1000548415739  and related paper.

Best,

Ron

Sent from my iPhone

On Apr 16, 2022, at 1:23 PM, Dan Miller <d...@rodagroup.com> wrote:

Yes, believing CDR is a moral hazard is a moral hazard that will result in mass death.

The idea of CDR being a moral hazard is rooted in the idea that we will not take climate action seriously and we will politely ask fossil fuel companies to please reduce their emissions, if it’s not too much of a bother.

Of course, we could put a price on carbon and use clean energy standards to force the phase out of fossil fuels. We could then also implement CDR with no risk of “moral hazard”.

See my Global Climate Action Plan for a set of policies that reduce emissions *and* removes CO2 from the atmosphere.

Of course, so far, we are not taking climate action seriously… and that is a moral hazard!

Dan

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<Global Climate Action Plan V3.pdf>

[Dan Miller]

Regarding your comments about the insurance industry, I heard this quote recently that struck me:

“Climate scientists are conservative in the opposite way that a risk manager is conservative.”

Also, regarding your point about using CDR as excuse for avoiding emission reduction, here is a quote from Kevin Anderson:

https://youtu.be/WQCofG9Urr4 

Dan

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[Wil Burns]

Thanks, Ron. At the end of the day, I remain skeptical that any of these studies can really tell us much. Beyond your arguments below, these studies operate in an extremely sanitized simulation of the real world, and, particularly, I wonder if policymakers would portray geoengineering options in the same way that they are portrayed to the people in these experiments if they decided that geo. was a good idea. This might exacerbate moral hazard considerations. Having said that, I think we’ve reached a point where we simply don’t have the luxury not to pursue CDR options, though we should try to keep major emitters’ feet to the fire to optimize emissions reductions. wil

 

[Robert Chris]

Hi Dan

That's because climate scientists are concerned to protect their reputations by not being accused of over-claiming their concerns, while risk managers are concerned about protecting their clients' profits but not under-calling the risks.

Who should we be listening to?

Regards

Robert

[Robert Chris]

Typo! Corrected below.

Regards

Robert

On 16/04/2022 23:28, Robert Chris wrote:

Hi Dan

That's because climate scientists are concerned to protect their reputations by not being accused of over-claiming their concerns, while risk managers are concerned about protecting their clients' profits by not under-calling the risks.