Can the Private Sector Get this Done?

The first of several thoughts on the private sector’s ability to make up for a lack of federal regulation.

A small polar bear nudging a large polar bear

This Thursday, on a balmy day in the Rose Garden with smooth jazz playing in the background, President Donald Trump announced that the United States would pull out of the Paris Agreement — the latest agreement under the United Nations Framework Convention on Climate Change (UNFCC). The Agreement, like unfortunately every major action related to climate change, had become a political football during the 2016 election, and the announcement, though predictable, was met with much hand wringing or celebration.

Within hours, a group of “subnational actors” — states, cities, universities, businesses ­­–had begun to join forces and entertain the prospect of remaining within the Paris accord, the federal government be damned. There are a variety of interesting constitutional problems that surround state action here, ranging from the Article 1, §10 prohibition on states entering treaties or forming confederations to the “dormant” commerce clause problems associated with one state imposing burdens on interstate commerce. But there is also an important practical question associated with the last aforementioned “subnational actor”: business. Now that the United States government is withdrawing from its Paris commitments that question is, can the private sector get this done?

This is a deeply complex and significant question, and a single blog post cannot do it justice. I will aim to address different facets of the question in coming posts, but I wanted to start with a discussion of one way the we could push the private sector along: leveraging private sector advocacy to implement nudges.

First, I want to address the question of why “we” need the “private sector” to do anything at all. Aren’t “we” the private sector? Isn’t asking the “private sector” to do something on climate change akin to us buying locally, driving less, taking cold showers and so forth. In a sense, yes. But that doesn’t mean that we can’t, or don’t need to, rely on help from private organizations that we interact with. Put bluntly: just because we want to do something doesn’t mean we will do that thing (think: dieting, watching less tv). And we want to emit less carbon dioxide.

That is not a political statement. Almost 70% of all registered voters (including Ds and Rs) “say the U.S. should participate in the international agreement to curb global warming.” Americans support a carbon tax by a two-thirds majority. In a Stanford poll, almost half of the Republicans polled (48%) said they were “more likely to vote for a candidate who supports fighting climate change,” (this was, admittedly, in 2015 *author sighs deeply*). A Georgetown poll in 2013 found that 87% of Americans support some type of EPA action on climate change. This type of polling obscures an even more universal truth. Regardless of the particular mechanism used (such as a carbon tax or regulation) or even the particular scientific justification, I would stake a bold claim that even larger majorities of Americans simply want to emit less carbon dioxide, so long as the price is right. In other words, we all want to pollute less.

(Two quick points on that front. One, this is squarely an area where thinking like a lawyer comes in handy, in that we should be separating substance (whether or not we should pollute less) from process (how we should be polluting less). We clearly agree on one of those things and should make that agreement clear. Second, it’s important to phrase this as a problem of pollution. Doing so a) is more politically salient, because no one likes pollution and because it highlights the non-climate mitigating externalities of climate mitigation, such as cleaner air, less asthma, and fewer oil spills, which are very popular and b) this framing takes some of the despair out of the whole thing. When you frame this as a problem of pollution, not politics, or a mind bendingly complex global energy crisis, solutions come into view. We’ve dealt with pollution before, we’ll do it again).

So we want to pollute less, including by lowering our own carbon emissions, but we don’t do it. (I could hyperlink you to death to prove the latter point, or simply ask: are you a vegetarian, do you drive places you don’t have to, do you know literally where the insulation is in your home, let alone what kind it is and how effective it is, do you think about emissions from shipping when buying food…). As this is a situation in which we collectively want to do something, but don’t do it, it is a situation that is ripe for a nudge.

A “nudge” in this context refers to an action taken by means of design that helps a person do a thing they want to do. (The term is taken from the book of the same name, “Nudge” by Cass Sunstein and Richard Thaler). For example, employees may want to eat healthier food in their office cafeteria, but always go for the pizza and french fries. Instead of taking away the pizza and french fries, the employer could move healthier choices to the front of the line, or move them to eye level, thus “nudging” employees to make the “better” choice (better from the perspective of the employees). Sunstein and Thaler outline a variety of scenarios where nudging is particularly helpful, such as particularly complex choices that occur infrequently, but I would add collective action problems to the list. Carbon emissions are a classic collective action problem — the benefit to each individual polluter (you) of limiting emissions is outweighed by the cost (think of it in terms of dollars or generic value, whatever is easier for you), but in the aggregate the benefit of limiting emissions globally vastly outweighs the cost of doing so. Given the above statistics on our collective desire to limit carbon emissions this may be an opportunity for a non-governmental solution to a very large collective action problem.

Thus, we get to why “we” want the private sector do something about climate change. We, acting as individuals with a desire to limit carbon emissions but a cost benefit analysis that cautions against individual action, want the institutions that we interact with to be designed in such a way so as to nudge us into lowering emissions. There are a million ways to do this,* but the important step here is realizing that we do, in fact, want the businesses and institutions we interact with to nudge us. We want to essentially engage in large scale, design oriented, pre-commitment devices that fulfill our desire to limit our emissions.

Which brings us to private sector advocacy and private environmental governance. Over the last several decades there has been a significant increase in environmental governance at the private sector level. That is, private organizations (businesses, but also NGOs and other non profits) have engaged in traditional public law activities, such as reducing negative externalities or managing common pool resources, with very little or no prodding from public institutions. In the absence of increased pressure from public institutions, the private sector (in the US and around the world) has continued to achieve fairly impressive success in terms of environmental governance. Walmart exceeded a 2015 target to lower their tier 1 carbon emissions by 25 million tons. Apple has built 200 megawatts of solar power in China in order to power their operations with renewable energy. Google has pushed state regulatory agencies and utilities to greatly increase the amount of renewables in the power mix. Target was one of the worlds leading regulators of toxics in the beginning of the 21st century. Private environmental governance is not some Ayn Randian ode to the altruism of corporate elites, and it’s not a bullet point in an argument about why government regulation is evil. It is a phenomenon worth paying attention to, and worth leveraging, particularly if the Federal Government of the United States is going to be this out of step with the electorate on climate change.

Michael Vandenbergh, a law professor at Vanderbilt, and I have an article forthcoming in the fall issue of Natural Resources & Environment (an ABA magazine), titled “Private Governance and the New Private Advocacy.” The basic premise is private environmental governance is an important and overlooked phenomenon, and that lawyers should consider the issues that arise in a world where advocates aren’t just petitioning government actors, but are increasingly focused on private actors as well. Researching and writing the article has made me appreciate that there could be a lot more reward in focusing advocacy efforts on private institutions than on government. As mentioned above, that “reward” could, and perhaps should, come in the form of better design (Sunstein and Thaler refer to it as “choice architecture”) that nudges us in the direction of fulfilling our desire to lower emissions.

Will this save us from the worst of climate change? On its own likely not, but better design and “voluntary”** private sector emissions reduction was almost certainly going to be part of the puzzle regardless of Paris. Even with Paris targets met, the planet was likely going require an additional 33 gigatons of C02e^ reduction through 2025 in order to meet the Paris warming goals (what Vandenbergh has referred to as the “Paris gap”), and that was likely going to have to come from “us” — households and the private sector. Bottom line, without abandoning traditional regulatory tools for reducing pollution, we should consider our own agency and utilize design to help us achieve our own goals. Further, one way of doing that is advocating for institutional change among private businesses and institutions we interact with (e.g. Amazon, colleges, your church). Returning to the principle question: can the private sector get this done? If “this” is lowering emissions such that we limit warming to 1.5C, the private sector is unlikely to be able to “get it done.” But we can get a lot closer if we nudge others to nudge us.

Endnotes

*I will try to write more about specifics in future posts. In the meantime, you could pick up a copy of Nudge. For a general taste, one example of a nudge initiative here would be to arrange default shipping options that lower emissions. For example, Amazon could have the default option, even for Prime customers, be no rush shipping. If the customer needed the product quickly, they could easily click over to the 2-day free shipping, but I suspect millions of items are shipped in needlessly carbon intensive ways just because the default, for Prime customers, is 2-day shipping.

**By voluntary I mean not done because of government regulation. If Google relies on 100% renewable energy because they think it’s good for their business future and attractive to customers that is “voluntary.” In other words, it doesn’t necessarily mean from the goodness of their hearts.

^C02e is “carbon dioxide equivalent”, essentially a way of putting the major green house gases, or “GHGs” (C02, Methane, Nitrous oxide, ozone, chlorofluorocarbons, and sulfur hexafluoride) on the same footing when measuring emissions.