Author: Chetan Hebbale

Categories
Health

Food Revolution: The History of GMOs and Transgenic Corn

Photo by Livier Garcia on Pexels.com

Humans have manipulated their environment since Homo sapien began to roam the Earth over 100,000 years ago. Over time, we have learned to optimize our existence on the planet through altering different natural surroundings – be it discovering fire, domesticating wild animals, and utilizing wood, stones, and metals as building materials to name a few. However, food remains nature’s most valuable commodity for humans, and like other aspects of nature we have been able to harness its power for maximum utility.

While humans have been modifying food crops for thousands of years, in the past 100 years advances in biotechnology have allowed us to manipulate nature’s bounty more than ever before through the rise of genetically modified organisms (GMOs). However, the rise of GMOs has fueled speculation and fear, raising ethical and health concerns for how we may be manipulating the food we all eat in ways we don’t understand.

One such controversial genetically modified crop is corn. Corn’s ability to grow easily and inexpensively along with an abundance of calories has placed it amongst the world’s most versatile and important crops. With the advent of this new technology, corn, amongst other crops, has undergone radical transformations yielding both tremendous benefits and serious risks. This paper will outline the history of human modification of food, the birth of genetic modification of crops through recombinant DNA, the specific biotechnology processes in altering crops, and finally a discussion of the promises and risks of genetically modified corn.

Human’s began actively manipulating nature for food production 10,000 years ago

The History of GMOs

Humans began to transition out of a hunter-gatherer lifestyle into an agricultural based one around 10,000 years ago, and this agricultural lifestyle was the driving force of society up till only around 100-120 years ago. Till the advent of the industrial revolution, humans have spent millennia learning how to enhance the plants and animals around them to maximize their food yield. Those who raise concern over the recent genetic alteration of food ignore how all early domestication of crops was also genetic modification by breeding desirable traits in plants from the random mutations that would occur in each crop generation.

The selective crop breeding to produce yield of a certain size, color, shape etc. has been so drastic that most of our staple crops (including strawberries, wheat, cabbage and corn) aren’t even remotely similar to any of their ancestors in the wild and could in fact no longer survive now without human intervention and care (Parrott 2006).

The industrial revolution of the last century started to shape what today’s system of modern agriculture looks like. As more advanced machinery and technology was introduced into the field, we began to see improved seed distribution, mineral and synthetic fertilizers, and improved farming techniques. However, the industrial revolution was also occurring alongside another revolution – the beginning of molecular biology.

For years scientists had been sure a class of cellular molecules had to be coding all the individual traits they were seeing in organisms. It wasn’t until Oswald’s Avery’s hallmark experiments with Pneumococcus in the 1940s that identified those molecules as DNA (Hauserman 2013). As DNA continued to be characterized throughout the later half of the 20th century, the most important discovery for GMOs was that of recombinant DNA.

Recombinant DNA means the ability to extract genetic material from one organism, artificially introduce it into another organism, and replicate that organism and have it express the foreign genetic material. In 1971, Paul Berg was working at Stanford University during his landmark gene splicing experiment where he was able to slice a piece of Lambda virus DNA using restriction enzyme EcoRI and insert it into Simian Virus 40 which had been cut with the same restriction enzyme.

The two types of DNA were rejoined into a single circular loop and the first recombinant DNA (rDNA) was created (Chemical Heritage Foundation). Scientists Herbert Boyer and Stanley Cohen were able to build on this work by inserting this rDNA into another organism to see if the genetic contents were able to be expressed in a new host.

In 1973, the two created a recombinant DNA plasmid by inserting the genes for resistance to bacterial antibiotic tetracycline into a plasmid. The plasmid was then transformed into a bacterial culture of E.coli and the only colonies that survived when exposed to tetracycline were those that contained the plasmid (Chemical Heritage Foundation). 

These experiments showed that genetic material could indeed be transferred between species. The result of Berger, Boyer and Cohen’s work has been nothing short of a scientific revolution in the last 40 years – we now can select traits we prefer from different organisms from different species and express them in something entirely different. The agriculture industry was one of the primary beneficiaries of this breakthrough.

In 1988, the world’s first genetically modified crop was created. Recombinant genes resistant to the herbicide had successfully been inserted into soybean. The insertion of a single gene which produced an alternate enzyme involved in aromatic amino acid biosynthesis made soybean tolerant to the herbicide glyphosphate (Chassy 2007).

Herbicide tolerant soybeans transformed the market for soybean production, farmers now had a labor efficient, environmentally safe and inexpensive way to control weeds. Genetically engineered soybean was such a success that 93% of the world’s soybeans are now grown this way (Shetterly 2013). The success with soybean launched a cascading snowfall as scientists around the world rushed to patent dozens of genetically modified seeds for different crops through the mid to late 90s.

Over this last decade, genetically modified crops have been planted on more than a billionacres across the world (Chassy 2007). It’s estimated that these new techniques have brought farmers around the world an additional $27 billion in revenue and reduced pesticide use by 224 million kg (Chassy 2007). As the boom set off for GMO’s after the success of soybean, one company emerged as a clear leader in the industry of transgenic crops – Monsanto Company.

By and far the largest producer of GMOs, the Monsanto Company pioneered the core technologies in the field of transgenic crops.

Five Steps to Monsanto’s Secret Sauce

The Monsanto Company was founded back in 1901 as a chemical company in St. Louis, Missouri and produced a variety of different products used through World War I, World War II and the post-War era. Monsanto became a player in the agricultural biotech industry in 1985 when it acquired G.D. Searle & Company and put its foot in the door with agriculture and animal/plant health.

Eleven years later, Monsanto purchased Agracetus to begin producing transgenic cotton, soybean and peanuts and proceeded then to buy out DEKALB, Cargill and Seminis to become the world’s largest seed company it is today (Bravo 2014). Monsanto’s most famous product is Roundup herbicide. This became the most used herbicide in the United States till reports emerged of its potential toxicity and possibility of containing carcinogenic material (Bravo 2014).

While their herbicide remains controversial, their technical expertise in seed modification is tough to rival. Using these five steps, Monsanto has been able to pioneer the development of almost every major genetically modified crop on the planet.

First, find a new trait. You can’t produce a genetically modified organism without identifying the trait you want the plant to have, and then finding what other organism already possess it. This process involves hundreds of thousands of experiments to determine what specific gene is in involved in which process and how it can affect the overall trait you’re hoping to select for.

Second, extract the gene. Monsanto engineers have developed proprietary technology called a “chipper” that uses high powered cameras and object-recognition algorithms able to shave off just a tiny piece of a seed, analyze it with genome mapping technology and isolate the particular gene of interest (Boyle 2011).

Third is trait insertion. Monsanto has developed what’s known as a “gene gun” which is a .22 caliber charge that fires a metal particle coated with DNA into plant tissue and is able to insert foreign DNA into the host crop genome that way. Recently a new technique requires placing the seed under incredible amounts of stress (heat, pH, nutrient starvation) and exposes is to a bug Agrobacterium tumefaciens to insert new proteins into its chromosome (Boyle 2011).

Fourth is the growth chamber. In massive growth chambers, seedlings are tested drought tolerance, salt tolerance, pest and disease resistance, etc.

Finally, the newly prepared seeds are planted. Monsanto provides very specific instructions regarding plant spacing, water and fertilizer use and plant population. Once your seed is planted, your genetically modified organism is ready to grow.

The Corn Revolution

Though Monsanto has had success with many GMO crops, the story for genetically modified corn is more complex. Corn, more formally known as maize, was one of the first crops in history to be domesticated. Humans learned early on how to cross-pollinate a scraggly grass called teosinte which contains minute fruitcases into the juicy corn kernels we grow today (Gewin 2003). In fact, the bright yellow corn husks we think of have never existed in the wild; they are entirely a product of selective breeding over thousands of years.  

The origins of its domestication begin in Mexico 9,000 years ago where it spread through the Americas as a staple crop capable of being able to be produced quickly and inexpensively. These capabilities make corn one of the most widely grown products in world; in fact, the United States is the world’s largest producer and exporter of corn (Shetterly 2013).  Accounting for more than 95% of the US’s total field grain production, the US pumps out corn from over 90 million acres of corn fields, laying mostly in America’s heartland.

Corn remains one of our most productive crops in terms of how many different products are corn derivatives. From the husk to the kernel, there are over 100 different corn byproducts. The most common we see are products like corn starch, corn syrup and corn oil. There are a range of other dietary by products most notably in cereals and baking mixes but also in more obscure products such as ice cream, chewing gum and coffee (GSMC). In fact genetically modified corn is found in 70% of the processed food supply (Gewin 2003).

The U.S. is the world’s largest producer of corn – a crop which is found in more than 70% of the world’s processed food supply

Corn byproducts extend into non-dietary fields as well, turning up in adhesives, paper cups, toothpaste and medicines as well as the use of corn in ethanol production(GSMC). While dry-milling and wet-milling operations use fermentation to extract ethanol from corn, scientists have begun to genetically modify corn itself to produce ethanol. The biotech company Syngenta has produced a genetically engineered corn that contains a synthetic microbial amylase (extracted from microbes near ocean hot-water vents) which is able to break down corn starch into sugar more easily (Pollack 2011).

Given the broad use of corn and corn products, its understandable why producers were eager to experiment with genetic modification to massively scale up its production. One of Monsanto’s first modifications to corn was using Bt technology and the rise of Bt-corn.

Bt stands for Bacillus thuringienis which is a soil bacterium that produces several crystal proteins that destroy the gut of invading crop pests (Gewin 2003). Several of these crystal (cry) proteins were engineered into corn to provide innate herbicidal properties and have been planted widely. It is hard to argue with the benefits that Bt-corn, along with a range of other Bt-crops, has brought to farmers.  

Not only has pesticide use has dropped by 50%, but certain industries like Alabama’s cotton fields and Hawaii’s papaya groves have been single handedly saved by Bt-crops against cotton bollworm infestations and the papaya ringspot virus. Moreover, the International Council for Science (ISCSU) has found that Bt-crops have lower levels of carcinogenic mycotoxins produced by fungi because there are fewer insect holes in plant tissue now.

While corn seems like a relative success, several risks remain. The concern today is that this broad-scale planting of Bt-corn will render the toxin ineffective over time as pests will grow resistant to the secreted toxin.

The Environmental Protection Agency is so afraid of Bt resistant pests that they’ve required 20% of Bt-corn fields also be planted with non Bt-corn so to slow the rate of pest resistance. More alarmingly is the risk of gene flow to other species. When pollen and seeds move in the environment through air/animals, it can transmit these new genetic traits to close by crops or other relatives through horizontal gene transfer.

The fear is that if these new seeds spread into the wild, they will have a competitive advantage over the local organisms and will displace valuable genetic diversity (Gewin 2003). Instances of this have already occurred in western Europe, where genetically modified sunflowers completely took over the ecosystem near a farm and in Mexico where modified corn replaced all the local plants near a farm. Because of their ability to out compete the local flora and fauna in terms of nutrient utilization and insect protection, Mexico has tentatively banned transgenic corn being planted in its fields (Gewin 2003).

Despite the risks, it seems unlikely that the GMO boom will bust any time soon. The value added from genetically modifying our staple food crops have simply paid too large of dividends to curtail all planting and development of potentially problematic crops. While the risks posed by GMO’s are seemingly real, there is simply not enough long-term data to conclude they are riskier (Gewin 2003).

Humans are not unfamiliar with taking these kinds of risks with their food however. For millennia we have been selectively breeding and manipulating our staple food crops to produce the yield we desire. This is simply another chapter in our ongoing quest to conform nature’s products. The discovery of recombinant DNA methods along with the advent of new technology which is allowing companies like Monsanto to be able to identify novel traits, isolate them, insert them into crops and plant them around the world is allowing for one of the greatest agricultural booms in human history.

Never before have we produced as much food as we are now (Chassy 2007) despite growing populations, shrinking arable land and depleted resources, and all of this can be attributed to the brilliant scientists who’ve been able to maximize the power of a single seed.

Given that there is currently harsh reaction to some governments already to GMO’s, its inevitable that the wheels of innovation will continue to turn to enhance modified seeds more than they already are to solve these problems. As with any new revolutionary technology, government regulation should continue to stay in place to ensure the long-term sustainability of GMO’s. In the end they may have no choice, genetically modified organisms are here to stay.

Works Cited

1- Boyle , Rebeca. 2011. “HOW TO GENETICALLY MODIFY A SEED, STEP BY STEP”, http://www.popsci.com/science/article/2011-01/life-cycle-genetically-modified-seed.

2 – Bravo, Kristina. 2014. “Here’s How the World’s Largest Biotech Company Came to Be”, http://www.takepart.com/article/2014/03/27/monsanto-timeline.

3 – Chassy, Bruce. 2007. “The History and Future of GMOs in Food and Agriculture”, http://www.researchgate.net/publication/249300545_The_History_and_Future_of_GMOs_in_Food_and_Agriculture

4 – Chemical Heritage Foundation. No Date. “Paul Berg, Herbert W. Boyer, and Stanley N. Cohen”, http://www.chemheritage.org/discover/online-resources/chemistry-in-history/themes/pharmaceuticals/preserving-health-with-biotechnology/berg-boyer-cohen.aspx.

5 – Gewin, Virgina. 2003. “Genetically Modified Corn – Environmental Benefits and Risks”, http://journals.plos.org/plosbiology/article?id=10.1371/journal.pbio.0000008

6 – Great Smokies Medical Center. No Date. “Sources of Corn and Corn By-Products”, http://www.gsmcweb.com/sources-of-corn-and-corn-by-products/.

7 – Hauserman, Samantha. 2013. “Oswald Theodore Avery”, https://embryo.asu.edu/pages/oswald-theodore-avery-1877-1955

8 – Parrot, W. 2006. “The nature of change: Towards sensible regulation of transgenic crops based on lessons from plant breeding, biotechnology, and genomics”, Proceedings from the 17th National Agricultural Biotechnology Council.

9 – Pollack, Andrew. “US Approves Corn Modified For Ethanol”, http://www.nytimes.com/2011/02/12/business/12corn.html

10 – Shetterly, Caitlin. 2013. “The Bad Seed: The Health Risks of Genetically Modified Corn”, http://www.elle.com/beauty/health-fitness/advice/a12574/allergy-to-genetically-modified-corn/

See all Publications

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More:

Categories
Climate Short Form

Is Nuclear Our Only Hope or a Waste of Time?

Photo by Pixabay on Pexels.com

Side #1: Investing In More Nuclear Is A Waste of Time

Building more nuclear power plants doesn’t make sense: they’re too expensive, take too long to build, and are fundamentally unsafe with the safety risks only increasing as the environment deteriorates.

The Cost and Time To Build Nuclear Plants Is Astronomical

Nuclear energy cannot economically compete with wind and solar. The cost of generating solar power ranges from $36 to $44 per megawatt hour (MWh), while onshore wind power comes in at $29–$56 per MWh. Nuclear energy costs between $112 and $189 – more than three times as much.

The Vogtle nuclear plant in Georgia, only the second reactor built in the US since 1996, is estimated to cost $27 billion and has been under construction for almost 10 years. Once fully built, Vogtle will generate about 2,200 MW of power. In comparison, the fully operational Bhadla Solar Park in India took 4 years to build, generates 2,245 MW of power, and cost $1.3 billion. If you had reinvested the remaining $25 billion set aside for the Vogtle plant into solar you would generate nearly 20 times the power and saved 6+ years.

Some may argue that learning by doing with nuclear plants will lead to standardization and cost savings. The evidence for that is limited. In France, the country with the most successful and expansive nuclear program covering 70-80% of the country’s electricity, construction costs have actually risen over time rather than fallen . This is due to rising labor costs, more complex reactors, and new regulations imposed after the Chernobyl and Fukushima accidents.

One study has shown that we can get 90% of the way to zero carbon electricity with no new nuclear by 2035 if we double the amount of wind and solar in this decade and triple it in the next decade. Accomplishing this will require substantial investments in battery storage technology, high-voltage transmission lines, and more efficient production methods. Unfortunately, we’ve invested more government R&D support into nuclear than any other type of renewable. If this changes now we could resolve many of the issues preventing real clean energy from being scaled at the level necessary.

There’s No Solution to the Nuclear’s Safety Problems

Radioactive waste remains active for up to 250,000 years. As of today, there is no permanent solution as to where waste can be stored. Right now nuclear plants are employing a temporary solution to store waste on-site in dry casks. The Nuclear Regulatory Commission has said this method is only safe for 60 years.

A permanent disposal site in Yucca Mountain, Nevada, has been surveyed, studied, and debated since 1987 but continually faces political hurdles and may never become a nuclear storage site (or it does and could become a nuclear volcano).

Some argue that the elegant solution to the nuclear waste problem is reprocessing. This is where the fission products and unused uranium in spent fuel can be continually re-used to generate additional nuclear fuel rather than being sealed and discarded.

President Jimmy Carter banned reprocessing in 1977 due to fears of the process creating plutonium, which could be used to make nuclear
weapons. But President Reagan lifted the ban in 1981. The problem is that the cost of reprocessing exceeds using the cost of using new fuel as long as the price of uranium remains low. At current prices of uranium, reprocessing increases the cost of generating electricity making it even less competitive against renewables.

The problem with maintaining and cleaning up nuclear waste is not just that it’s incredibly expensive and poses proliferation risks – it will get more dangerous because of climate change.

Nuclear has to be close to a body of water or coast because of the need to access large amounts of water to cool the nuclear fuel rods before they overheat. These are the same areas that will experience increasing flooding, hurricanes, and sea level rise as the climate crisis worsens. This will increase the risk of meltdowns and release of nuclear waste – like the release of radioactive waste water into the Pacific Ocean following the meltdown of the Fukushima reactor in Japan.

Side #2: Nuclear Power is Our Only Chance To Get To Net-Zero

While nuclear may be expensive right now with potential environmental vulnerabilities, there is simply no other carbon-free electricity source available today that can meet the size and scale of today’s energy demand and what’s needed in the future.

Nuclear Supports An Equitable Transition, Unlike Renewables

Yes, building new reactors is expensive. But this is mostly just true in the U.S. It’s because there is not enough repetition and standardization to get cost savings. China, Japan, India and South Korea have gotten there. South Korea had an average decline in the costs of nuclear of 2%. Small modular reactors promise to transform the speed and cost of bringing new plants online by taking 1/2 to 1/3 as much time with at least 15-17% cost reduction.

The more important point is to look at comparative costs if we didn’t have nuclear at all. Every year 442 global nuclear reactors reduce 1.2 billion tons of emissions. Just keeping existing plants open would be far less expensive than developing and bringing online new renewable technologies to remove the same amount of emissions.

Lastly, the cost of nuclear has multiple layers. Detractors of nuclear focus on one dimension of cost which is the cost per MWh. But there are significant social costs in cities where coal plants are being shut down and entire communities are losing their livelihoods and identity. Nuclear power provides better economic prospects for job-retraining paying 37% more than wind and solar as well as providing long-term jobs not just temporary jobs to install solar panels or wind turbines (which require very little long term operational support).

Wind and Solar Cannot Match the Reliability of Nuclear

Nuclear is largest source of carbon free baseload power. Period. It’s the only energy source that can supply electricity throughout the day and night in a zero carbon way. That alone will make it a necessary part of a net-zero economy.

Right now nuclear comprises of nearly 20% of the U.S. electricity supply – more than 10x the amount currently coming from solar. Because of the vast variability in amount sunshine and strength of wind, renewables suffer from a severe amount of unpredictability when it comes to grid management. As a result, on their own they are incapable of meeting current U.S. energy demand necessitating fossil fuels to fill the gap.

But renewables are not only unreliable from an intermittency standpoint – they’re also very vulnerable from a supply chain standpoint. For example, technologies for battery storage and solar panels carry large mineral and mining costs. Nearly half of the minerals and raw materials used for solar cells come from the Xinjiang region of China where there are allegations of forced labor camps being used for production. By contrast, the United States has an abundant domestic uranium supply estimated to last 100-years.

Lastly, is is the issue global renewable adoption. Other countries don’t have the option of solar and wind because of geographical constraints in terms of how windy or sunny their countries are. For them, nuclear may be the only way to go carbon free. The U.S. only represents about 11% of all carbon emissions in the world, so for the remaining 89% nuclear may be their only way to substantially decarbonize. 

Nuclear’s Safety Issues Are A Solvable Problem

The safety discussion around nuclear is happening on an uneven playing field. In the real world, the safety of nuclear should not be compared to renewables, but to coal. The reality is that solar and wind cannot replace coal as a continuous source of energy supply. If the 20% of the electricity mix from nuclear goes down, it will at least in part be filled by coal and natural gas.

However, the health effects of coal and natural gas plants have been normalized compared to the fear of radiation exposure. The deaths from air pollution and cancer as a result of sulfur dioxide, arsenic, nitrous oxide, and particulate matter exposure coming from coal plants dwarfs the number of people who have died from nuclear power by orders of magnitude. Suffice it to say, nuclear is not causing 800,000 pre-mature deaths every year like coal. Similarly, fracking for natural gas has known links to asthma symptoms, childhood leukemia, cardiac problems, and birth defects in surrounding communities.

Coal also releases more radiation than nuclear waste. Burning coal gasifies its organic materials into fly ash which contain radioactive elements like uranium and thorium. Chinese fly ash on its own has .4 pounds of triuranium octoxide/MT.

In fact, the entire amount of nuclear waste created in the U.S. would fill one football field, 10 yards deep. By comparison, a single coal plant generates as much waste by volume in one hour as all nuclear power plants have in their entire history. If we want to comprehensive get rid of coal, nuclear is our best bet.

Aside from the issue of fossil fuel substitution, nuclear plants do not necessarily need to be subject to climate disasters. Following Fukushima, nuclear engineers have created concrete solutions to avoid rising sea levels and hurricane floods. These include relocating the plants 6 miles inland, building 50-foot tsunami walls, using a lead acid battery backup system, and relocating the diesel generators to a higher site.

Lastly, the obvious answer to the waste problem is reprocessing. Nuclear facilities can and should reprocess nuclear fuel and use it to generate additional fuel. Plutonium can be blended with uranium to create mixed-oxide fuel (MOX) that could burn in ordinary reactors and also render plutonium no longer usable for weapons. UK, France, several other EU countries, and Japan have been using MOX for years.

Frankly, the threat of nuclear proliferation with nuclear plants has had 70 years of data to be proven true. Since the 1950s, 132 commercial reactors in 35 U.S. states have been licensed for operation. Today, 104 remain in operation at 65 sites in 31 states. Globally, 442 reactors are in operation in 30 countries. Where’s the dirty bomb? It hasn’t happened. Terrorists cannot simply just pick up some uranium and make a bomb. This worst case scenario should not be driving our energy policy when the planet is facing more immediate threats.

Conclusion

While nuclear may seem dangerous and expensive, it does provide a major pathway to large-scale decarbonization. However, given the cost and time needed for new nuclear plants to come online and significantly reduce global emissions, putting that money into wind and solar infrastructure and battery storage would likely achieve the same results faster and without the potential environmental draw backs.

Ultimately, even if we starting build more nuclear reactors now they will take an average of 10 years to build, by which time the green energy transition will have to be mostly complete. There’s no guarantee that new types of reactor designs, like small modular reactors, will be quicker to build or financially competitive and there is no time or money to waste.

Rather than investing any more time or money into building new nuclear plants, the existing ones should be kept online with the remainder of R&D investment going towards new solar and wind.

Back

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More:

Categories
China Foreign Policy Short Form

Understanding Modern China Through Mao

Photo by Chao Xu on Pexels.com

Mao Zedong, the father of the Chinese Communist Party, casts a long shadow on modern day China despite his death nearly a half century ago. Like any shadow, China and its current president Xi Jinping trail alongside the towering figure in both form and substance.

Understanding politics in modern China requires reckoning with two of the most significant legacies of the Mao era – the Anti-Rightist campaign of the late 1950s and the cult-of-personality developed around Mao himself through mass media and propaganda during the Cultural Revolution in the 1960s. One could draw a straight line from these foundational events to Xi Jinping’s current attack on intellectualism, his brutal suppression of dissenting voices, and attempt to exert singular control over Chinese society through ideological indoctrination.

The Anti-Rightist campaign began in 1957, less than ten years after Mao and the CCP founded the People’s Republic of China. It was in response to the Hundred Flowers Movement launched the year before when the CCP encouraged Chinese citizens and intellectuals to openly express their opinions and criticize the government to help the party correct its mistakes.

This brief liberalization of political expression in China proved to be a bridge too far. Mao found the overwhelming criticism from the masses to represent a threat to the party’s control of Chinese society and responded by ordering a brutal purge of so-called “rightists”.

Anyone who favored capitalism over collectivization or had criticized the CCP was accused of plotting to overthrow the government. An estimated 550,000 people were rounded up and either publicly criticized through “struggle meetings”, sent to prison camps for re-education, or even executed[1]. The actual number of victims may be between 1-2 million or more[2].

The Anti-Rightist campaign was a game-changer not only because of how arbitrary the persecutions were – indeed nearly 98% of all who were labeled “rightists” may have been wrongly applied[3] – but that it was aimed at the mainstream, intellectual class not the fringes of Chinese society[4]. It effectively shuttered intellectual dissent and turned China into a de-facto one party state.

Today, Xi Jinping is echoing the legacy of the Anti-Rightist campaign through a similarly repressive crackdown on intellectual discourse. In 2013, Xi’s comprehensive reform plan effectively banned any discussion of constitutional democracy and universal values – it was the biggest ideological campaign to restrict speech since Mao’s death[5].  

As a result, hundreds of professors, lawyers, and activists have been targeted for promoting so-called Western concepts like a free press, civil society, and rule-of-law – acts that have resulted in their harassment, jailing, exiling, and disappearance for “subversion of state power”[6],[7]. Access to China itself has shriveled with scholarly researchers facing surveillance, intimidation, and restrictions on entering the country or accessing archival research materials[8].

Xi is merely borrowing Mao’s suspicion of the intellectual class – if left free to protest or critique the party then they would risk unraveling the hegemonic control of the CCP over the Chinese people.

How were both leaders able to pull off this repressive form of governance? One of Mao’s enduring legacies is the extent to which he was seen a veritable demi-god in the eyes of the public – an infallible, heroic leader who rescued China from the imperialist West[9].

The deification of Mao saw its fever pitch during the Cultural Revolution when he urged young people to purge China of the capitalist and revisionist elements in society and impose “Mao Zedong Thought” as the dominant ideology of the country[10].

The People’s Liberation Army deployed expansive propaganda and mass media to build a cult-of-personality around Mao. Songs glorifying him were sang in schools and played in loudspeakers in public, the “Little Red Book” of Mao’s quotations was almost mandatory to be held by everyone and quoted extensively, even a loyalty dance was created for people to express their love and devotion to Mao[11].

Xi is now in the process of leveraging the party’s vast propaganda apparatus to create his own god-like image as a way to engender support from the public in the face of totalitarian control.

In 2019, the CCP launched a mobile app some have dubbed as the “Little Red App” to promote Xi’s ideology where party members and civil servants must log points in every day[12]. Starting in August 2021, “Xi Jinping Thought” has been integrated into the Chinese school curriculum from primary school through college with Xi’s ideology being taught to “cultivate love for the country, the Communist Party of China, and socialism.[13]” At the most recent Central Committee meeting of the CCP, Xi’s ideology was declared the “essence of Chinese culture.[14]“

After having eliminated term limits for himself, Xi now stands as ruler-for-life of China[15]. Equipped with the lessons from Mao, he stands ready to quash political dissent, expand the party’s control on every facet of Chinese society, and cement his legacy in the same strain of revolutionary immortality that Mao Zedong imprinted into generations of Chinese citizens.

[1] Roderick MacFarquhar, “The Politics of China: Sixty Years of The People’s Republic of China”, pg. 82, Cambridge University Press, 2011, https://ebookcentral.proquest.com/lib/jhu/detail.action?docID=803133.

[2] Christine Vidal, “The 1957-1958 Anti-Rightist Campaign in China: History and Memory (1978-2014)”, HAL Archives, April 25th, 2016, https://halshs.archives-ouvertes.fr/halshs-01306892/document.

[3] Roderick MacFarquhar, “The Politics of China: Sixty Years of The People’s Republic of China”, pg. 83, Cambridge University Press, 2011, https://ebookcentral.proquest.com/lib/jhu/detail.action?docID=803133.

[4] Andrew Mertha, “Lecture – The Anti-Rightest Movement and the Great Leap Forward”, Module 3 – Maoism and Its Legacy.

[5] Cai Xia, “The Party That Failed: An Insider Breaks With Beijing”, Foreign Affairs, January/February 2021, https://www.foreignaffairs.com/articles/china/2020-12-04/chinese-communist-party-failed.

[6] Tom Phillips and Ed Pilkington, “No country for academics: Chinese crackdown forces intellectuals abroad,” The Guardian, May 24th, 2016, https://www.theguardian.com/world/2016/may/24/academics-china-crackdown-forces-intellectuals-abroad.

[7] Human Rights Watch, “China: On “709” Anniversary, Legal Crackdown Continues,” July 7th, 2017, https://www.hrw.org/news/2017/07/07/china-709-anniversary-legal-crackdown-continues.

[8] Sheena Chestnut Greitens and Rory Truex, “Repressive Experiences among China Scholars: New Evidence from Survey Data,” The China Quarterly, 242, June 2020, pp. 349–375, https://www.cambridge.org/core/journals/china-quarterly/article/repressive-experiences-among-china-scholars-new-evidence-from-survey-data/C1CB08324457ED90199C274CDC153127.

[9] Ian Buruma, “Cult of the chairman,” The Guardian, March 7th, 2001, https://www.theguardian.com/world/2001/mar/07/china.features11.

[10] Ronald McLeod, “The Great Proletarian Cultural Revolution: Mao Zedong’s Quest for Revolutionary Immortality”, Dissertations, Theses, and Masters Projects, 1990, https://scholarworks.wm.edu/cgi/viewcontent.cgi?article=4378&context=etd.

[11] South China Morning Post, “How Mao Zedong built up his cult of personality – from new Frank Dikötter book How to be a Dictator,” October 13th, 2019, https://www.scmp.com/lifestyle/arts-culture/article/3032488/how-mao-zedong-built-his-cult-personality-new-frank-dikotter.

[12] Iza Ding and Jeffrey Javed, “Why Maoism still resonates in China today,” The Washington Post, May 29th, 2019, https://www.washingtonpost.com/politics/2019/05/29/why-maoism-still-resonates-china-today/.

[13] BBC, “China schools: ‘Xi Jinping Thought’ introduced into curriculum,” August 25th, 2021, https://www.bbc.com/news/world-asia-58301575.

[14] NPR, “China’s Communist Party, with eye on history, gives Xi Jinping the same status as Mao,” November 11th, 2021, https://www.npr.org/2021/11/11/1054646063/china-xi-jinping-communist-party.

[15] James Doubek, “China Removes Presidential Term Limits, Enabling Xi Jinping To Rule Indefinitely,” NPR,  March 11th, 2018, https://www.npr.org/sections/thetwo-way/2018/03/11/592694991/china-removes-presidential-term-limits-enabling-xi-jinping-to-rule-indefinitely.

See all publications

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More:

Categories
Short Form Technology

It’s Time To Regulate Cryptocurrencies

Photo by Ivan Babydov on Pexels.com

Cryptocurrencies are the digital zeitgeist. They represent a cultural moment where technological innovation meets financial intrigue – and everyone wants a piece. While the societal buzz tends to focus on those becoming wealthy from crypto, behind the scenes there are thousands of crypto victims. Countless hacks, extortion schemes, and market manipulation tactics should have shed the perception that crypto is a harmless game to make money, yet its popularity and adoption has only grown over the years.

Unregulated market forces have made crypto into the Wild West where anything goes and, ostensibly, anyone can become rich. But if it sounds too good to be true, it probably is. Without sensible regulation, regular consumers will continue to be defrauded and have their funds hacked, not only risking personal financial ruin but triggering downstream instability to wider financial markets. 

Last month the crypto platform PolyNetwork temporarily lost $600 million of its customers assets to hackers. This was only a hack of moderate severity as far as infamous thefts go. In 2019 alone, hackers stole more than $4 billion by breaching crypto exchanges and digital wallets. In the crypto world, there are no specific rules to ensure protection of customer assets. Unlike banks, crypto exchanges don’t have any specific cyber security requirements, making hacks common and relatively easy for sophisticated cyber criminals utilizing techniques like SIM card swapping, phishing, and URL hijacking.

In addition, crypto exchanges are not required to have systems to prevent fraud and manipulation, nor are there rules to prevent or minimize conflicts of interest. One analysis identified 175 “pump and dump” schemes where crypto traders drastically inflated and then suddenly crashed the prices of 121 cryptocurrencies in 2018, generating millions in losses for unknowing consumers.

Another analysis found widespread use of automated trading programs or “bots” to manipulate prices. The bots used strategies similar to a practice outlawed in stock and future markets called “spoofing” where traders create fake orders only to cancel them – an attempt to trick consumers into buying or selling crypto based on false market signals.

Popular cryptocurrencies like Bitcoin, Ethereum, Litecoin, Ripple, and Dogecoin have suffered from numerous hacks and price manipulation schemes, losing more than $5 billion in consumer funds. Photo by Worldspectrum on Pexels.com

As of September 2021, the total market value of all the crypto assets surpassed $2 trillion. While it’s a small part of the $400+ trillion financial system, it is not an isolated one. There are growing linkages to the wider financial system through banks, brokers, and technology vendors that interface with crypto exchanges – including large players like Fidelity, Goldman Sachs and Wells Fargo.

This will only grow as the consumer demand for crypto shows no sign of abating. If left unaddressed, the cybersecurity and market manipulation vulnerabilities in the cryptocurrency market could cause collateral damage in the global financial system.

Proponents of cryptocurrency will argue that cryptocurrency regulations would slow down the advancement of the technology or could raise barriers for investor access and capital formation. While this may be true initially, addressing the vulnerabilities present in the cryptocurrency market would boost investor confidence and technology investment in the long term.

The fact that crypto exchanges lack basic cybersecurity protections or are victims of market manipulation from practices outlawed in the traditional financial market underscores how badly these entities lack strong operational, governance, and risk practices. These barriers will do more to prevent global adoption of cryptocurrencies than attempts to develop guardrails around them.

Ultimately, interest in cryptocurrency will only grow. And with it, theft and defrauding will also grow. The federal government has an imperative to create regulatory oversight of crypto-assets and the intermediaries that operate in that space given the risk to consumers and the larger financial market. If the U.S. continues to just let the invisible hand guide the crypto market, soon the trillions that consumers, banks, and trading firms have held in this market will also become invisible.

Back

Read More:

Categories
Climate Change Long Form

Engineering vs. Ecosystems: Evaluating Climate Adaptation Approaches

Photo by Tom Fisk on Pexels.com

Final Report – Engineering vs Ecosystems: Evaluating Climate Adaptation ApproachesDownload

This report sets out to answer the question – when it comes to climate adaptation, are engineering-based solutions (e.g., sea walls) more effective and economical than ecosystem-based approaches (e.g., coastal revegetation)?

I first look at the environmental drivers of adaptation, current international efforts, and dive into a case study of a town in the Fiji Islands that’s specifically wrestled with these competing approaches to adaptation.

The goal of this work is to help institutions like the U.N. Adaptation Fund and Green Climate Fund prioritize which adaptation approaches have been most successful to inform their financing decisions as the world has little time to plan for how they will brace for the inevitable environmental impacts of a 1.5 to 2C rise.

Back

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More:

Categories
Climate Change Long Form

Do Renewable Portfolio Standards Work?

Photo by Sam Forson on Pexels.com
Accelerating The Transition: Comparing Renewable Portfolio Standards in Texas and CaliforniaDownload

The Biden administration has pledged to achieve a 50-52% reduction from 2005 levels in nationwide greenhouse gas (GHG) emissions by 2030. As part of this goal, the administration has stated that they would like to see 100% of the nation’s electricity come from renewable sources by 2035 – up from roughly 20% right now.

The signature policy support mechanism for renewable energy in the U.S. has been state-wide renewable energy portfolio standards, hereby called RPS. The goal of an RPS is to increase the use of renewable energy in electricity generation by requiring electricity suppliers to provide consumers with a minimum share of electricity from eligible renewable resources (e.g. 20% of electricity generated needs to come from renewable sources).

The two states that generate the most renewable energy in the U.S. – Texas and California – have made an RPS a central part of their renewable energy policy strategy. However, the two states differ quite substantially in their implementation philosophies and supporting policies.

California has a much more hands on approach with increasingly ambitious RPS targets over the years with a plethora of diverse, and targeted statewide policies for specific renewables, while Texas has a more hands-off approach, setting a low renewable target and providing comparatively fewer state-wide incentives and regulations.

This paper seeks to explore the differences between Texas and California and assess changes in each state’s overall CO2 emissions from the electricity sector and generation of renewable energy since their RPS went into effect. The paper concludes with lessons learned and recommendations for how RPS policies can be improved nationally to ultimately achieve Biden’s goal of a carbon-free electricity system.

Back

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More:

Categories
China Economics and Trade Short Form

The Legacy of China’s Economic Transformation

Photo by zhang kaiyv on Pexels.com

Through the lens of government revenues and expenditures, China is the most decentralized country in the world[1]. With 31 provinces, 334 prefecture units, 2,851 county-level administrative units, and more than 41,000 township level units[2], these subnational governments have significant autonomy in governing the world’s largest population. In fact, local government accounts for almost 70-80% of all government spending in China, double that of other OECD countries[3].While China might appear to have a top-down, hierarchical command-and-control government, fragmentation of authority is actually at the heart of China’s political system[4].

It has not always been this way. Decades of political reform that began in the 1970s have led to waves of centralization and de-centralization of government control. Understanding this dynamic is crucial to make sense of China’s future – in particular, its ability to carry out the economic reforms it promised to make when it joined the World Trade Organization (WTO) in 2001. China’s economy is the lynchpin on which social stability hinges, and Xi Jinping plans to drive future growth not through the free-market reforms which made it into the economic juggernaut it is today, but through re-imposing central control on key parts of the economy.

The fragmentation of China’s contemporary political and economic system began in 1978, when Deng Xiaoping inaugurated a period of “reform and opening up”. Agriculture was de-collectivized, large state-owned enterprises (SOEs) were privatized, and government interference in economic forces like employment and inflation were relaxed[5]. The result was double-digit growth and the lifting of roughly 800 million people out of poverty[6]. As China pushed to join the WTO, the central government began to slash tariffs, strengthen intellectual property rights, and welcome in foreign companies. However, regional governments, who retained substantial control over their local economies, did not always share Beijing’s enthusiasm for this paradigm shift.

China’s decision to join the WTO and the ensuing threat of foreign competition produced a range of regional reactions, some in lockstep in Beijing while others resisted, fearing that competition would slow their efforts to maintain ambitious growth. For example, the prefecture of Yanbian in northeast China began to consolidate its cement industry in 2003. Rather than allowing market forces decide which firms should stay in business, the local government handpicked the winners and took away business licenses and machinery from firms they felt were inefficient[7]. This type of regional subversion against the market liberalization that China had promised the world reflected a wider divergence between the interests of Beijing and its ability to influence the sprawling network of subnational entities to follow their lead.

This regional subversion, however, was also responsible for China’s infrastructure boom. In 1994, the central government centralized tax collection and effectively starved regional governments of their revenue. In order to meet their growth targets, local governments turned to a new source of revenue – land. They began leasing millions of acres of land to real estate developers which was turned into highways, subways, high-rise apartments, and associated urban infrastructure[8]. The result was a doubling of the length of China’s highways between 2007 to 2017 – enough to go around the world three times – as well as ha ving 8 of the world’s 12 longest metro-rail systems.

The global economic crisis of 2008 turned the tide in Beijing’s interest to fulfill the hopes of its accession to the WTO. To China’s leaders, the crisis exposed America’s model of free-market capitalism to be fundamentally weak[9]. The solution, they argued, was a re-centralization of economic power and an anti-corruption drive to rid the nation of crony capitalism. Since Xi Jinping came to power, SOEs have become significantly stronger and larger, taking on leading roles in China’s Belt and Road Initiative to build infrastructure around the world and ultimately export their form of state capitalism[10]. This has corresponded with a retreat of the private sector through a crackdown on financial technology firms like Alibaba and Tencent as well as a recalibration of center-local revenue sharing to reduce debt accumulation[11].

Xi’s anti-corruption drive, the longest and widest in the CCP’s history, can also be understood through the lens of reigning in the autonomy of subnational governments. One of the primary mechanisms of central influence through the fragmented system is by the CCP and the state appointing a nested hierarchy of cadre leaders. These are bureaucrats placed at all levels and are supposed to be trained in the party’s ideology and carry out the will of the central government[12]. So far, Xi’s campaign has ensnared 1.5 million officials, both high level and low level, who will ultimately be replaced with those who will more closely hew the line of the central government, and Xi himself[13].

Under Xi’s reign, China is returning to an era that it is most familiar with – command and control. To deliver economic reforms and continued growth, China will grapple with its structure of fragmented authoritarianism through centralized crackdowns in an attempt to execute a uniform agenda and vision. Will it work? History has shown that decentralization has led to China’s most explosive growth, but perhaps Xi will continue to defy all odds.

[1] Michael Davidson, “Creating Subnational Climate Institutions in China,” Harvard Project on Climate Agreements, December 2019, https://www.belfercenter.org/sites/default/files/files/publication/davidson-china-paper%20designed-version-3.pdf.

[2] Andrew Mertha, “Lecture – Disaggregating the State”, Module 8 – Center-Local Relations. Johns Hopkins University, Blackboard.  

[3] Michael Davidson, “Creating Subnational Climate Institutions in China,” Harvard Project on Climate Agreements, December 2019, https://www.belfercenter.org/sites/default/files/files/publication/davidson-china-paper%20designed-version-3.pdf.

[4] Kenneth Lieberthal and Michael Oksenberg, “Policy Making in China: Leaders, Structures, and Processes. Princeton University Press”, pg. 137, Princeton University Press, 1988.

[5] Jacques Delisle and Avery Goldstein, “China’s Economic Reform and Opening at Forty: Past Accomplishments and Emerging Challenges,” The Brookings Institution, April 2019, https://www.brookings.edu/wp-content/uploads/2019/04/9780815737254_ch1.pdf.

[6] Maria Ana Lugo, Martin Raiser, and Ruslan Yemtsov, “What’s next for poverty reduction policies in China?”, The Brookings Institution, September 24th, 2021, https://www.brookings.edu/blog/future-development/2021/09/24/whats-next-for-poverty-reduction-policies-in-china/.

[7] Yeling Tan, “How the WTO Changed China: The Mixed Legacy of Economic Engagement,” Foreign Affairs, March/April 2021, https://www.foreignaffairs.com/articles/china/2021-02-16/how-wto-changed-china.

[8] Yuen Yuen Ang, “The Robber Barons of Beijing: Can China Survive Its Gilded Age?” Foreign Affairs, July/August, 2021, https://www.foreignaffairs.com/articles/asia/2021-06-22/robber-barons-beijing.

[9] Rana Mitter and Elsbeth Johnson, “What the West Gets Wrong About China,” Harvard Business Review, May-June 2021, https://hbr.org/2021/05/what-the-west-gets-wrong-about-china.

[10] Yeling Tan, “How the WTO Changed China: The Mixed Legacy of Economic Engagement,” Foreign Affairs, March/April 2021, https://www.foreignaffairs.com/articles/china/2021-02-16/how-wto-changed-china.

[11] The Economist, “Xi Jinping’s crackdown on Chinese tech firms will continue,” November 8th, 2021, https://www.economist.com/the-world-ahead/2021/11/08/xi-jinpings-crackdown-on-chinese-tech-firms-will-continue.

[12] Maria Edin, “State Capacity and Local Agent Control in China: CCP Cadre Management from a Township Perspective,” The China Quarterly, March 2003, No. 173 (Mar., 2003), pp. 35-52.

[13] Yuen Yuen Ang, “The Robber Barons of Beijing: Can China Survive Its Gilded Age?” Foreign Affairs, July/August, 2021, https://www.foreignaffairs.com/articles/asia/2021-06-22/robber-barons-beijing.

Categories
China Climate Change Foreign Policy Policy Memo

Three Ways China Can Tackle Its Emissions

Photo by Pixabay on Pexels.com

Executive Summary

China is the world’s largest emitter of CO2 emissions, by far. It represents nearly a third of all emissions by itself – more than double the U.S. and the next seven nations combined[1]. As a result, China is under intense pressure to meet its emission targets set out in Glasgow at COP26. Achieving these targets will hinge on the ability for the central government in Beijing to influence a sprawling network of provincial and sub-provincial governments to make emission reductions in their local areas.

China’s emissions come from three primary sources: industrial production (50%), the power sector (40%), and the transportation sector (8%)[2]. Here, we lay out a roadmap to inform diplomatic negotiations on how the Chinese government can reduce emissions from these sectors through center-local coordination on policy reforms in energy investment, production, and consumption. These reforms include stronger permitting rules against coal plants, synchronization of their national emissions trading system, and incentives for electric vehicles (EVs).

Background

By some fiscal measures, China is the most decentralized country in the world[3]. Its “quasi-federal” system was born out of decentralization reforms in the late 1970s which have created a constellation of central and local institutions with varying, sometimes conflicting, responsibilities and mandates for energy and climate decisions[4]. The strength of these mandates largely depend on which agency is issuing and enforcing them.

Historically, regulating GHG emissions originates with China’s most salient environmental concern – air pollution. This fell under the purview of the National Development and Reform Commission (NDRC) until 2018 when the government transferred its climate related responsibilities to the Ministry of Ecology and Environment (MEE)[5]. In July 2021, China reinstated the NRDC as the primary planning body on climate change and has tasked it with creating a roadmap for how China can meet its emission targets.

Since 2007, China had established energy intensity reduction targets whose enforcement has been handed down to local governments and are factored in their performance evaluation[6]. There has been significant geographic variation in local enforcement due to competing incentives for economic growth and development. 

Reform Recommendations

In its roadmap, the NRDC should recommend that the central government:

Reclaim authority on permitting rules for new coal-fired power plants. Authority to permit new coal plants was decentralized to the provinces in 2014 which resulted in a rapid increase in coal permits across the country[7]. China is now the world’s largest consumer and producer of coal[8]. By reclaiming permitting authority, Beijing can restrict new plants and set capacity reduction plans in line with the global pledge to “phase down” coal[9]. China can expect resistance from coal mine owners and provinces with coal dependent economies as they are highly dispersed and enjoy autonomous control – the central government will face substantial difficulty without credible punishments for permitting violations.

Harmonize local emissions trading system (ETS) pilots to transition into the new national carbon market. In 2013, China launched seven provincial/municipal ETS pilots in preparation for the rollout of their national carbon market in 2020 which is to be run by the national MEE department. In these pilots, local governments found ways to bypass fees and lessen the impact of carbon prices on their preferred investments like coal. Thus, in rolling out the national market, MEE will need to contend with those local governments skirting the rules by standardizing and closing loopholes around carbon allowance allocations, compliance, and data measuring, reporting, and verification (MRV) systems.

Require local governments to expand license plate quotas to encourage uptake of electric vehicles. Local governments have broad control over the transportation sector which they have used to limit emissions by forbidding certain types of cars from entering city centers each day through license plate requirements[10]. The central government can require provinces to expand the scope of these requirements in two ways – (1) only allowing cars with EV license plates at certain times, days, and lanes and (2) allowing cities to waive license plate restrictions all together for EVs so they’re not subject to any driving restrictions compared to gas-powered cars[11]. Beijing could complement these regulations with expanded central tax incentives to further increase uptake of EVs on China’s roads.

Taken together, these reforms give China a significant boost in their efforts to slow climate change as they directly take on local resistance to cutting major sources of emissions. At Glasgow, China pledged to peak its CO2 emissions before 2030[12], thus it has roughly eight years to course correct the diverging local interests of the world’s largest population. Failure to do so will likely sink global efforts to avoid a 2°C rise which will precipitate severe environmental deterioration.

[1] BBC, “Report: China emissions exceed all developed nations combined,” May 7th, 2021, https://www.bbc.com/news/world-asia-57018837.

[2] Columbia University In The City Of New York, “Guide to Chinese Climate Policy: Emissions by Sector and Sources,” https://chineseclimatepolicy.energypolicy.columbia.edu/en/emissions-sector-and-source.

[3] Michael Davidson, “Creating Subnational Climate Institutions in China,” Harvard Project on Climate Agreements, December 2019, https://www.belfercenter.org/sites/default/files/files/publication/davidson-china-paper%20designed-version-3.pdf.

[4] Ibid. Davidson

[5] David Stanway, “China shake-up gives climate change responsibility to environment ministry,” Reuters, March 13th, 2018, https://www.reuters.com/article/china-parliament-environment/china-shake-up-gives-climate-change-responsibility-to-environment-ministry-idUSL3N1QV23P.

[6] Ibid. Davidson.

[7] Ibid. Davidson.

[8] Sara Schonhardt, “Energy crunch raises questions about China’s devotion to coal,” E&E News, October 13th, 2021, https://www.eenews.net/articles/energy-crunch-raises-questions-about-chinas-devotion-to-coal/.

[9] Connor Perrett, “World leaders at COP26 strike agreement to ‘phase down’ unabated coal and call on wealthy nations to double funding to vulnerable nations,” November 13th, 2021, https://www.businessinsider.com/cop26-concludes-with-agreement-to-phase-down-coal-2021-11.

[10] Wang, Rui, “Shaping Urban Transport Policies in China: Will Copying Foreign Policies Work?” Transport Policy, 17(3), 147–152, 2010, https://doi.org/10.1016/j.tranpol.2010.01.001.

[11] Sandalow, David, “Guide to Chinese Climate Policy,” Columbia University Center on Global Energy Policy, 2018, https://energypolicy.columbia.edu/sites/default/files/pictures/Guide%20to%20Chinese%20Climate%20Policy%207-27-18.pdf.

[12] Climate Action Tracker, “China,” November 3rd, 2021, https://climateactiontracker.org/countries/china/targets/.

Back

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More:

Categories
Climate Change Infographics

Which Policy Incentives for Residential Solar Power Are Effective?

Photo by Kindel Media on Pexels.com

Key findings from a paper published in the Journal of Environmental Economics and Management

Back

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More:

Categories
Climate Change Economics and Trade Short Form

Carbon Taxes vs. Cap and Trade: Economic Theory and Outcomes

Photo by Pixabay on Pexels.com

What is Carbon Pricing and Why Do We Need It?

Time is running out to prevent a 2°C rise in global temperature. The world has 29 years to make annual carbon emissions 40 – 70 percent lower than they are today[1]; otherwise, 190 million people will be exposed to extreme droughts, and more than 70 percent of Earth’s coastlines will be flooded[2]. While there are several avenues to reduce emissions, carbon pricing is a uniquely powerful mitigation solution. One analysis found that on its own, carbon pricing could deliver almost a third of the emission reductions necessary to avoid a rise of 2°C – more than any other mitigation option available.[3]

Carbon pricing is an economic tool that discourages pollution by imposing monetary costs on CO2 emissions. When faced with a price tag on carbon, industries will pursue emission reduction opportunities that are cheaper rather than paying the price. The price of carbon can be set through two vehicles: a carbon tax or a carbon cap.

A carbon tax directly prices carbon through a fixed, per-unit charge for each ton of CO2 emitted. While the level of emissions may fluctuate, the tax is set according to a projected amount of emissions at that price.[4]

A carbon cap indirectly prices carbon through a quantity-based approach. It sets a quota of carbon allowances, or permits, for emitters which represents their emission target. A carbon cap is often called “cap-and-trade” or an “emissions trading system” because the cap limits the number of allowances that businesses can have, but there is a market which enables the emitters to buy and sell their permits, effectively setting a price for emitting CO2. 

The primary advantages of carbon pricing are that its effects radiate across all sectors of the economy, it’s technology neutral, it provides a transparent price/quantity, and it generates revenue that can be used by governments to support an equitable clean energy transition.

Here, we argue that carbon taxes are preferable to cap-and-trade schemes due to offering price certainty, a simpler implementation and administrative cost, and a comparatively lower chance of corruption and rent-seeking behavior.

What are the Economic Assumptions Behind Carbon Pricing?

At its core, carbon pricing seeks to address the market failure of pollution control. In a market economy, firms have no incentive to restrict the negative externalities from greenhouse gas emissions like sulfur dioxide and particulate matter or dumping toxic waste.

The burning of coal is responsible for 800,000 premature deaths in the U.S. every year [5] while the byproducts of fracking have known links to asthma, childhood leukemia, cardiac problems, and birth defects in surrounding communities[6]. Yet companies rarely pay for these harmful impacts unless through successful litigation or penalties imposed by government authorities like the EPA. Carbon pricing attempts to impose a cost on these firms for their polluting activities by determining a socially efficient level of pollution.

The socially efficient level of pollution is determined through a cost-benefit analysis that balances the marginal social benefits (MSB) from pollution control with the marginal social costs (MSC). While striving for zero pollution would be ideal in the context of combatting climate change, the costs of achieving this would be astronomical and may not even be possible. At the same time, cleaning up the last few units of pollution would likely not provide that much additional marginal benefit.

As indicated in Figure 14-3[7], where the MSB and MSC curves intersect at Point E is considered the socially efficient level of pollution because the emissions rate maximizes the net social value of production.[8] The marginal private benefit (MPB) curve represents the benefits to the firm of cleaning up its pollution. As is evident from the graph, the firm does not achieve that much benefit compared to what the community receives and if left to its own devices would abate emissions at point I, far below Point E. Thus, to abate emissions at a socially efficient level an external intervention is needed.

Carbon pricing analyzes this market dynamic and attempts to compel firms to abate emissions at a socially efficient level. At Point E, the carbon tax would be set at the price on the Y axis, while cap-and-trade would set the emission cap based on the quantity on the X axis. Both schemes rely on foundational ceteris paribus, or all-else-unchanged, economic assumptions about the MSC and MSB of abatement. If these assumptions change, then the economic rationale for these policies also changes.

The first assumption is that the marginal social benefits curve is downward sloping. This implies that the first few units of abatement provide a lot of social benefit, but this benefit decreases over time as more emissions are cut. The logic is that as more emissions are cut the end products those emissions are created for – be it electricity, consumer goods, or transportation – get further reduced which diminishes your quality of life. But what if the MSB curve was upward sloping? In this case as more emissions are reduced, then the positive environmental externalities of cleaner air and water and preserved forests improve your quality of life more than carbon-intensive goods becoming more expensive. In that scenario, the tax price would be a lot higher, and the emissions cap a lot lower since the marginal social benefits are increasing the more pollution is reduced and everyone is better off if emissions can be abated more aggressively.

The second assumption is that the marginal social costs curve is upward sloping. This implies that the more emissions are abated, the more expensive it gets for the firm and society to do so.  While some emission reductions could be easier and cheap to achieve early on, after the low hanging fruit are addressed then more expensive technology and product substitutes are needed to achieve additional reductions.

A carbon cap uses a quantity based approach by allocating a fixed amount of carbon allowances tied to an emissions target. A carbon cap is often called “cap-and-trade” or an “emissions trading system” because while the cap limits the number of pollution allowances that businesses can have, there is a market where emitters can buy and sell their allowances, effectively setting a price for emitting CO2.

However, this relationship is likely not linear. As firms begin reducing emissions, there will be improvements in energy efficiency and technology along the way which will decrease the cost of abatement over time. As a result, the marginal social cost curve can be thought of as an initially upward sloping curved line that then begins to flatten and move downward. Consequently, the price of a carbon tax would likely be lower and the emission cap higher. This is because as the abatement cost decreases, then the socially efficient pollution point is further down the marginal social benefits curve so a higher amount of emissions can be curtailed (cap) at a lower price (tax).

The third assumption is that the carbon price or emission quantity at the socially efficient pollution level is sufficient to avoid the impacts of climate change. There is no guarantee that the point where the MSC and MSB curves intersect is the exact quantity which prevents a rise of 2°C. Indeed, there is still considerable uncertainty as to the exact amount of emission reductions that are needed to avoid this fate. If a tax or a cap is placed at the socially efficient pollution level and the planet continues to warm beyond the target 2°C benchmark, then carbon pricing schemes can no longer be set at socially efficient pollution levels and instead need to be set at a higher amount, economically inefficient level in the hopes of achieving the reductions necessary.

Which Carbon Pricing Scheme is Preferable?

There are several advantages and disadvantages when choosing between a carbon tax or cap-and-trade system, but in theory both will create incentives for cost effective emission reductions in the short run and cost reducing innovation in the long run.[9]

Based on years of real-world results, a carbon tax is preferable to cap-and-trade for three reasons[10]: more effective revenue collection, lower risk of corruption, and carbon price stability.  

First, carbon taxes can capture revenues more easily than cap-and-trade with lower administrative cost. Cap-and-trade systems are more complicated to implement due to the need to determine the pricing of permit allocations as well as developing trading infrastructure so firms who reduce more emissions than required can sell their additional reductions to firms that are behind. This complexity is compounded by the need for some degree of free permits needed to be given to energy-intensive industries where fossil fuel substitutes don’t exist, like in the creation of cement or steel. Carbon taxes are a comparatively easier and more straightforward way to collect revenue since they are evenly applied across all industries and at a flat rate based on the quantity of emissions released.

The ease of revenue collection under a carbon tax connects to our first assumption – what if the marginal social benefits curve is actually upward sloping, not downward? In that scenario every unit of emissions reductions gets converted into revenue that the government can use to accelerate mitigation and adaptation efforts. This improves your quality of life more than the negative effect of certain products being more difficult or expensive to consume, especially if you’re living in a coastal community affected by sea-level rise, or in the American West that’s been ravaged by wildfires. Thus, choosing a carbon tax which can more effectively collect revenue is preferrable to increase the marginal social benefits of abatement.

Second, carbon taxes provide less opportunity for corruption which can occur through rent-seeking behavior with cap-and-trade permits. Cap-and-trade systems create a new valuable asset in the form of pollution permits. It also creates a scarcity where one previously did not exist. As a result, scarce permits can be exploited by politicians and corrupt administrators who can sell off permits to certain favored industries and pocket the fees. A carbon tax provides less opportunity for corruption because it doesn’t create artificial scarcities, monopolies, or rents.[11] The tax cannot be sold to other entities and there are no new rent-seeking opportunities.

This benefit of carbon taxes connects to our second assumption – that the marginal social costs of abatement is assumed to increase over time but may actually be decreasing. Carbon taxes help drive a decrease in social costs because the fees are not being diverted by corrupt economic agents like could potentially happen in a cap-and-trade system. Rather these funds can be re-invested to bring down the cost of expensive technology that’s needed to achieve additional reductions after easy decarbonization steps are taken.

Third, a carbon tax offers price certainty as opposed to quantity certainty which limits volatility in the market price for carbon. Under a cap-and-trade system only the quantity of emissions is fixed, thus allowing the price to fluctuate as economic agents shoulder their own individual costs in order to meet that emission limit. For example, in 2006 the carbon prices the European cap-and-trade system ranged from $44.47 to $143.06 per ton of CO2.[12]  While cap-and-trade provides greater emission reduction certainty and is more environmentally effective, the price uncertainty of this approach may make the gains short lived. Uncertainty in the price of carbon will slow investments in clean energy, disrupt energy markets, and may become extremely unpopular with the public if the price fluctuates frequently causing instability in the price of everyday consumer goods.

This drawback of cap-and-trade connects to our third assumption – even if we have quantity certainty about the emissions we’ll reduce, how do we know that’s sufficient? If the assumption changes that the quantity of emissions at the socially efficient pollution point is not enough to mitigate against climate change, then carbon taxes provide a preferrable alternative since they drive market behavior through prices not quantity and can achieve progressively higher emission reductions through higher prices.

The Way Forward

Ultimately, carbon pricing is a crucial tool for reducing CO2 emissions as the environment continues to deteriorate. Currently, four-fifths of global emissions are unpriced, and the global average emissions price is only $3 per ton[13] – far too low to induce substantial emission cuts. As policymakers continue to explore avenues to decarbonize their economies, pricing carbon at the socially efficient pollution level presents a market-driven opportunity to act on this existential crisis.

Introducing carbon taxes as part of international climate negotiations at COP26 is one viable path forward to increase their uptake. For example, negotiations are continuing on how much money developed countries will donate to developing countries to help with adaptation and mitigation costs. These transfer payments could be conditioned on developing countries instituting carbon taxes with more aid going to countries with higher carbon taxes. This approach would incentivize more ambitious carbon pricing globally and increase trust in the system that climate aid is tangibly going towards higher amounts of abatement.

Works Cited

[1] Hal Harvey, Robbie Orvis, and Jeffery Rissman, “Designing Climate Solutions: A Policy Guide for Low-Carbon Energy,” pg.2, November 2018, https://islandpress.org/books/designing-climate-solutions.

[2] Alan Buis, “A Degree of Concern: Why Global Temperatures Matter”, NASA, June 19th, 2019,  https://climate.nasa.gov/news/2865/a-degree-of-concern-why-global-temperatures-matter/.

[3] Hal Harvey, Robbie Orvis, and Jeffery Rissman, “Designing Climate Solutions: A Policy Guide for Low-Carbon Energy,” pg. 253, November 2018, https://islandpress.org/books/designing-climate-solutions.

[4] Sanjay Patnaik and Kelly Kennedy, “Why the US should establish a carbon price either through reconciliation or other legislation,” The Brookings Institution, October 7th, 2021, https://www.brookings.edu/research/why-the-us-should-establish-a-carbon-price-either-through-reconciliation-or-other-legislation/. 

[5] EndCoal, “Health,” https://endcoal.org/health/.

[6] NRDC, “Reduce Fracking Health Hazards,” https://www.nrdc.org/issues/reduce-fracking-health-hazards. 

[7] Paul Samuelson and William Nordhaus, “Economics: 19th Edition,” pg 275, https://www.mheducation.com/highered/product/economics-samuelson-nordhaus/M9780073511290.html.

[8] Paul Samuelson and William Nordhaus, “Economics: 19th Edition,” pg 273, https://www.mheducation.com/highered/product/economics-samuelson-nordhaus/M9780073511290.html.

[9]James Boyce, “Carbon Pricing: Effectiveness and Equity,” 2018, Ecological Economics, https://www.sciencedirect.com/science/article/abs/pii/S092180091731580X.

[10] William Nordhaus, “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming,” Review of Environmental Economics and Policy, Volume 1, Number 1, Winter 2007, https://www.journals.uchicago.edu/doi/abs/10.1093/reep/rem008.

[11] William Nordhaus, “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming,” Review of Environmental Economics and Policy, Volume 1, Number 1, Winter 2007, https://www.journals.uchicago.edu/doi/abs/10.1093/reep/rem008.

[12] William Nordhaus, “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming,” Review of Environmental Economics and Policy, Volume 1, Number 1, Winter 2007, https://www.journals.uchicago.edu/doi/abs/10.1093/reep/rem008.

[13] Kristalina Georgieva, “Launch of IMF Staff Climate Note: A Proposal for an International Carbon Price Floor Among Large Emitters,” The International Monetary Fund, June 18th, 2021, https://www.imf.org/en/News/Articles/2021/06/18/sp061821-launch-of-imf-staff-climate-note.

Back

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

View Chetan’s Portfolio

Read More: