Economists debate decarbonization: optimistic and pessimistic scenarios

debate forum , Is Green Growth Possible? was hosted by the Institute for New Economic Thinking in December, consisting of papers by  economists debating whether catastrophic global warming can be stopped while maintaining current levels of economic growth. The arguments are summarized  for the non-economist in “The Case for ‘conditional optimism’ on climate change” by David Roberts in Vox (Dec. 31) .  Economists may be interested in the full papers, which  include “The Road to ‘Hothouse Earth’ is Paved with Good Intentions” and “Why Green Growth is an Illusion”, both by Enno Schröder and Servaas Storm.  The authors conclude that  “..  The world’s current economies are not capable of the emission reductions required to limit temperature rise to 2 degrees. If world leaders insist on maintaining historical rates of economic growth, and there are no step-change advances in technology, hitting that target requires a rate of reduction in carbon intensity for which there is simply no precedent. Despite all the recent hype about decoupling, there’s no historical evidence that current economies are decoupling at anything close to the rate required…. Without a concerted (global) policy shift to deep decarbonization, a rapid transition to renewable energy sources, structural change in production, consumption, and transportation, and a transformation of finance, … the decoupling will not even come close to what is needed.”

The Inconvenient Truth about Climate Change and the Economy”  by  Gregor Semieniuk, Lance Taylor, and Armon Rezai summarizes and analyzes the October 2018 IPCC report, Global Warming of 1.5 °C. ,  finding it overly optimistic about global productivity growth and fossil fuel energy use, and reiterating the argument that politics are holding back climate change solutions. They conclude that “a big mitigation push, perhaps financed by carbon taxes and/or reductions in subsidies, is possible macroeconomically even if the link between energy use and output is not severed. This, however, would require considerable modifications of countries’ macroeconomic arrangements. Needless to say, military establishments and recipients of energy subsidies wield political clout. Fossil fuel producers have at least as much. Whether national preferences will permit big shifts in the use of economic resources is the key question.”

Finally, in “Conditional Optimism: Economic Perspectives on Deep Decarbonization”, author Michael Grubb  takes issue with Schröder and Storm, saying that their papers rely on historical data and rates of change, and thus are characterized by a “pessimism about our ability to change what matters fast enough. ” Grubb states that this “may  be emblematic of a growing trend in energy-climate economics, of what we might term historical futures analysis.”  He lays out a  technical economic critique and suggests four fundamental principles for his own “conditional optimism”, which relies on analysis based on the rate of displacement of carbon intensive energy supply by the growth of alternate sources.

California’s progressive policies yield better job growth and wage growth than Republican comparators

UC Berkeley logo_laborcenterA November 2017 report from the Labor Center at University of California Berkeley  examined the “California Policy Model” –  defined as a collection of 51 pieces of legislation and policy implementations enacted in California between 2011 and 2016 – and found that with progressive policies such as minimum wage increases, increased access to health insurance, reduction of carbon emissions and higher taxes on the wealthy, the state showed  superior economic  performance  in comparison to Republican-controlled states and to a simulated version of California without such policies.  According to  “California is Working: The Effects of California’s Public Policy on Jobs and the Economy since 2011“,  the suite of progressive policies resulted in superior total employment growth , superior private sector employment growth, and higher wage growth for low-wage workers from 2014 to 2016. All the while, keeping the state on track to meet its 2020 GHG emissions targets.  The  environmental policies included in the analysis were: starting in 2006, AB 32, which committed the state to lowering its greenhouse gas emissions to 1990 levels by 2020;  regulations under AB 32 in 2012 and 2013, which introduced the state cap and trade program;  SB 350 in 2015 and 2016,  committing the state to greater use of renewable energy and further improvements in energy efficiency ; and SB 32, which raised the emissions reduction goal to 40 percent below 1990 levels by 2030.  The report warns that  enforcement of labour standards and a lack of affordable housing remain as challenges facing the state, and also admits to possible weakness  regarding the second of its two methods of analysis, the synthetic control statistical method.

 

TWO IMPORTANT GLOBAL ENERGY UPDATES

From REN21, the annual Renewables 2015 Global Status Report  provides up to date data on the global renewable energy industry and policy landscape. It credits China’s increased use of renewable energy and the OECD’s progress for “landmark ‘decoupling’ in 2014 –  For the first time in four decades, the world economy grew without a parallel rise in CO2 emissions. “ From the International Energy Agency, the World Energy Outlook Special Report on Energy and Climate Change  presents a detailed assessment of the energy sector impact of known and signalled IDNC national climate pledges for the COP21 meetings, and concludes that they will be insufficient to meet the 2 degree C goal. The report states, “A transformation of the world’s energy system must become a uniting vision if the 2°C climate goal is to be achieved.”  The IEA sets out “four pillars for success” in that endeavour.

The European Circular Economy Debate Informed by New Job Creation Report

An interim report by the Club of Rome examines the social benefits that a circular economy would bring to the Swedish economy. The full report, due out in summer 2015, will include the Dutch and Spanish economies as well. The Circular Economy and Benefits for Society: Swedish Case Study shows Jobs and Climate as Clear Winners estimated the effects of three different scenarios to reduce carbon emissions.

The report found that if all three decoupling strategies were undertaken together, carbon emissions would be cut by almost 70% and job creation  would likely exceed 100,000. This report was partly supported by Swedish Association of Recycling Industries, and was released with the stated objective of influencing the current political debate in the European Commission, where a proposed Circular Economy program was withdrawn amidst controversy in 2014. The original proposal, included a 70 per cent recycling and reuse target for 2030, as well as a requirement to increase the recycling rate for packaging waste to 80 per cent by 2030 and a ban on the landfilling of recyclable plastics, metals, glass, paper and cardboard, and biodegradable waste by 2025. Read also Circular Economy Package Consultation Expected Before Summer (April 21) and follow developments from the official EC Circular Economy website.

TD Bank Report on Canada’s Green Economy: Reconcile the Economy and Environment

On October 2nd, one of Canada’s Big Five banks, the TD Bank, released a report on “green economics” in Canada. TD found that environmental considerations have already become entrenched in corporate decision-making in Canada, and that reducing environmental impact often reduces costs, drives innovation, and stimulates growth. TD’s preliminary analysis indicates a recent “decoupling of economic growth from environmental degradation”, wherein the percentage of GHG emissions per 1% GDP increase has fallen, while improved air and water quality, recycling rates and protected lands have accompanied strong overall growth. The report suggests that in order to better understand and encourage these trends, Canada needs a holistic focus on the “greening of the economy” in all sectors, rather than dichotomizing “green” and “brown” economics. To this end, TD calls for the development of environmental, economic, and government policy, and corporate responsibility indicators to help measure gains across industries and at all levels.         

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