“Economists have a modest role in climate and biodiversity policy”

Alpizar, born and raised in Costa Rica, began his inaugural by referring to the community service he performed while completing his economics studies. His career started there, in Ostional National Park: “Every month, 50,000 turtles come to lay their eggs on a kilometre-wide beach. The local community plays an important role in protecting newborn turtles and keeping the beach clean.”

Francisco was given the task to write down the rules the community had to follow to protect the turtle population. The idea was to stay there for a month, but that turned into six. “It’s a beautiful place, far away from everything, where you can share your time with these amazing creatures every day.”

Nature instead of stock market

That first career step after graduating turned out to be decisive for his entire career, he says: “I was destined to do something financially. Maybe on the stock market, because I was good at statistics. But during my stay in Ostional, it became clear my destination lay in environmental economics. I wanted to stay close to nature. Also, I’ve always liked to position myself in the interface between science and practice. I believe that we academics shouldn’t only produce science, but also ensure that that science is useful in practice. Sometimes by showing others the right way, but sometimes also by getting your hands dirty and taking your scientific results into the field.”

For instance, he devoted a chapter in his PhD thesis to a method for determining the price of entrance tickets to protected nature reserves. “It was a rather technical text that was probably read by few people. After graduating, I simplified things and started working with the competent authorities. Ultimately, after long consultations with policy makers and after convincing park managers, my methodology was officially adopted as the method for determining the price of tickets.”

“We can no longer fix it”

The idea behind it was simple: to devise a method to determine a realistic entrance price. And with the help of a number of simple rules of thumb, he developed a solution for this. It is that simplicity that the scientific field of environmental economics desperately needs, Alpizar believes: “We’ve reached a moment in history where we must solve two urgent problems: dealing with climate change and biodiversity loss. We can’t wait another twenty years. The extent to which the climate is changing and biodiversity is declining is so extensive that we can no longer fix it. This changes the rules of the game. Economists strongly believe in efficiency and optimisation. But that approach falls short here. An environmental economist shouldn’t be concerned with the question of what the most effective way is to make progress. Nor whether it makes economic sense to intervene now or to wait a little longer. What is needed now, simply is that progress is made. And that progress does not have to be made ‘at minimal costs’, another hobbyhorse of economists.”

“Remarkable conclusions”

According to him, the common approach is the reason why economic optimisation models fall short in determining climate and biodiversity goals. Alpizar: “To predict the future, economists use dynamic models that include climate change and biodiversity loss. They predict the economic consequences based on these models. The point is that these models are highly simplified. Disruptive ecological and climatic consequences, such as rising sea levels, flooding and collapsing ecosystems, are not included. But looking around, we see that these types of extreme events are becoming more and more common. If you ignore that, you may end up with some strange conclusions. Such as: it’s OK to wait a while before taking measures and even higher temperature increases than the 1.5 degrees Celsius from the Paris agreements. Ecologists and climatologists believe these are extremely strange conclusions.”

Rules of thumb

That is precisely why Alpizar advocates a simpler narrative: we shouldn’t leave the ‘why’ of climate measures to economists, but to natural scientists or philosophers. That leaves the question: how do you come up with measures that can withstand public resistance? First of all, there must be a reasonable alternative available if people have to give up something. Alpizar: “The reason why the EU measures on pesticides failed is that the consequences for farmers have not been carefully considered. They were strongly against the measures and in my opinion, they had solid arguments for that. It will only work if farmers can switch to a less damaging product that does its job just as well.”

He also points out the discussion around pricing carbon emissions: “Economists from left to right agree that we should include the social costs of these emissions in, for instance, the price of fossil fuels. The theory is that less fossil fuels are used because people have a fallback option. If petrol prices rise without people being offered better public transport, the intended substitution effect will not occur. The quality of life then decreases, because people spend more money on petrol.”

Simpler rules of thumb

That may be the case, but how should it be done? Alpizar advocates simpler rules of thumb: “From an environmental economist’s perspective, I think we need to be more attentive to the implications of policy on human behaviour. This may mean that we sometimes have to choose measures that are ‘good enough’, but not perfect. Second, we need to understand the implications of a given measure for different groups in society, from rich to poor. We need economic models for that. And thirdly, policy must be aligned with the need for people to behave more sustainably. I’m not just talking about measures to make solar panels attractive, but also about measures to help people make more sustainable choices in the supermarket. Just as it makes sense to put high taxes on cigarettes, the government must be prepared to do this for other ‘bad’ products. Conversely, products that are good for the climate and biodiversity should be subsidised. The balance must tip in favour of sustainable production.”

He emphasises that economists alone will not save the world: “The challenges we face are so great that we need all possible disciplines. It truly requires teamwork. And we economists should be a little humble about our role. I say: let the natural scientists tell us where to go and we’ll make sure we get there.”