News - July 29, 2020

Global contract

Geert van Zandbrink

Blogger Geert van Zandbrink hopes the climate crisis – just like the coronavirus crisis – will be tackled worldwide through an ‘immaterial covenant’.

In this final phase of my Bachelor’s degree in Economics and Policy, I am increasingly able to form an opinion on everything I have learned in the past three years. More and more, I see the world through the eyes of an environmental economist who was obviously educated in Wageningen. In my view, there are clear parallels between the education at this university and the theory of ecological modernization, which assigns an important role to technological development, market interventions, and a high level of policy participation.

The problem with public goods is that there is no incentive at the individual level to contribute financially

I have written before about what could be called the ‘sustainability religion’: the belief in sustainability to which you unwittingly get converted during your time as a Wageningen student. Slowly but surely, WUR students become convinced of the need for sustainability and change their behaviour here and there, perhaps by eating less or no meat, by using less plastic packaging or by no longer flying.

From the economics angle, various aspects of the climate issue are explained as a classic problem of public goods. These are goods that everyone can ‘consume’ at the same time, such as lampposts and dykes, or air and soil quality. The problem with public goods is that there is no incentive at the individual level to contribute financially to their maintenance. It is more attractive to benefit from them without contributing anything. And yet the best shared outcomes are created when everyone does do their bit.

Fortunately, the economic theory does offer a solution to such a problem: closing a contract in which you simply agree that everyone will contribute. That is easy to do when a problem like this arises between two parties. At national level, we have a government which facilitates a kind of mega-contract among the entire Dutch population by means of taxation and public spending.

I believe that what we need is more of an immaterial covenant between everyone in the world

For the climate problem, however, the scale is a lot larger than just one country. Attempts to create an explicit ‘giga-contract’, such as an international climate treaty, have only been partially successful. That is why I believe that what we need is more of an implicit contract, an immaterial covenant between everyone in the world, which is more like a set of unwritten values than a pile of papers.

The sustainability religion is a perfect example of an implicit contract. That is why I have more faith in that kind of deep-seated agreement than in technology or economic policy instruments. It is difficult to convince people of the necessity of change, but once we all realize how serious the situation is, we are capable of showing great flexibility very quickly. We saw that at the start of the coronavirus crisis, and in many ways the climate crisis is no different.