Sunday 21 September 2014

The economics of saving the world

In his New York Times column, Paul Krugman reports on two new studies, both of which indicate that limiting carbon emissions would be much cheaper than initially thought, and may actually increase economic growth. This would be in part because fossil fuels have negative side effects over and above global warming, in particular health effects that "drive up medical costs and reduce productivity".

Further in his column, he takes a swipe at those on the left who claim that "saving the planet requires an end to growth" (a position he calls "climate despair", such as groups like the degrowth movement and the Post-Carbon Institute. This, he reckons, is in large part due to a misunderstanding of what growth is, where those making such claims probably see it as a "crude, physical thing, a matter simply of producing more stuff, [not taking] into account the many choices — about what to consume, about which technologies to use — that go into producing a dollar’s worth of G.D.P."

I have written about this before in response to another of Paul Krugman's columns -actually and somewhat surprisingly, at the moment of typing, my post is 9th on the list when you google the words "Paul Krugman". He is one of the people I respect the most in the world and it feels somewhat strange to write about my disagreeing with him when he has informed so much of my perceptions of the world, but here goes.

First, let me say that reports of a lower than estimated price to fighting CO2 emissions is unqualifiably good news. It won't greatly surprised most environmentalists, who typically care more for the quality of air they breathe than for oil companies' profits, and who have long explained that the costs of renewables was bound to drop as the industry became bigger, but it's nice to see it recognised.
I also reckon that Krugman is right when he surmises that people have an uncertain understanding of what growth is. Although part of that can be attributed to GDP being a highly flawed indicator, in the construction of which come many highly questionable assumptions. It may be that the de-growth makes a point that is not exactly linked to the economist definition of growth, while still being very relevant to what most people understand by it.

Still, Paul Krugman is right that we have some choices over what to consume and the technologies to produce it. So, to which level of emissions must the reductions linked to those choices takes us, say, ten years from now if we are to avoid catastrophic climate change?
Essentially, zero. Actually, there is a strong chance that this won't be enough and we need to get negative, that is, having an economy that, on aggregate, removes CO2 from the atmosphere.

To a theoretical economist, this last paragraph is no issue. Indeed, there is no mathematical law stating that this is impossible, and indeed if you believe that a growth trend of around 2% a year is the strongest force in the universe, there are no physical constraints that should prevent it returning in the long run. However, we would then be in the domain of the joke about an economist having to lead a group out of a tree-less desert island who starts with "assume a boat".

How likely is it that the world could reach zero-emissions while maintaining growth? Well, if we go by past experience, we can see that so only a weak-decoupling (ie a reduction of emissions per $, but not in total emissions) has ever been reached in a context of growth. Here we not only need a strong decoupling (reducing total emissions), but need to take it all the way to zero in an historical blink of an eye. I agree that there is no mathematical law stating is impossibility, but that is a rather weak objection. What is the scenario leading to no emissions while maintaing growth in the developed world? Yes, renewables are a great help, but electricity production is probably the easiest sector. We also need to get to zero three other sectors of approximately equal weight: manufacturing, housing and transportation.
I know of the objection that a massage is part of the economy yet doesn't cause much emissions, but how many massages a day would you want to have? (And, if the answer is five hours, would a tenfold reduction in transports in consumer goods while getting five hours of massages a day not be called a reduction in growth by most?) Absent a scenario that no-one has so far described, it seems by far the most likely that, if we do achieve such a spectacular reduction in CO2 emissions, total production will have been reduced. Will growth one day return, long into the future? Maybe, but this does not invalidate the message that, in the foreseeable future, it is highly unlikely to be compatible with our environmental constraints.

All the more so since it is not just CO2 that is a constraint. Arable lands, water, most minerals, halieutic reserves... it is hard to avoid the impressions that we have pretty much hit peak everything. And if much of the benefits of limiting CO2 emissions is that people, being more healthy, become more productive, the pressure on other resources will grow even more. So we would need to find means of production that would not only stop CO2 emissions, but also massively reduce the intensity of consumption of pretty much everything. Alternatively, it will mean that the economy could stop growing.

The key message of left-wing environmentalists is that we should not worry much about that, certainly in the developed world. For we have long gone past the point where growth is required for a good life -indeed, many people find consumerist life stressful and anxiety-inducing. Much of our consumption seeks to satiate marketing-fabricated needs. Much of our aspiration is positional rather than absolute. Growth has ceased to improve our lives.
What is needed, at least in our current arrangement, is for people to have jobs. And this is not going to be harmed: clean technologies are far more labour-intensive in return for being much less other-resources-intensive. And until they are up and running, we have the opportunity for the mother of all investment programs in order to achieve the transition, something that is just what the doctor ordered in those times of economic slump. Beyond that, probably, the prospect of less consumerism, more meaningful lives and jobs and, yes, more time to spend with family and friends rather than in the office. None of that feels like despair, except maybe despair for the collective refusal to embrace it.

No comments:

Post a Comment