{"id":123671,"date":"2018-12-10T12:00:59","date_gmt":"2018-12-10T12:00:59","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=123671"},"modified":"2018-12-06T13:05:04","modified_gmt":"2018-12-06T13:05:04","slug":"unhinged-gdp-growth-could-actually-destroy-the-economy-economists-find","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2018\/12\/unhinged-gdp-growth-could-actually-destroy-the-economy-economists-find\/","title":{"rendered":"Unhinged GDP Growth Could Actually Destroy the Economy, Economists Find"},"content":{"rendered":"
\"\"<\/a>

The Longview Power Plant, a coal-fired plant in Maidsville, W. Va., on Aug. 21, 2018.
Photo: Spencer Platt\/Getty Images<\/p><\/div>\n

5 Dec 2018 – <\/em>For decades, scientists have warned of the pending crisis for the planet and humanity in the event of runaway climate change. But a new paper from prominent economists frames the situation in language that people might actually understand: Not addressing climate change, they conclude, will lead inevitably to \u201cworldwide economic collapse.\u201d<\/p>\n

Researchers\u00a0also have a warning for renewable energy evangelists and techno-optimists, concluding that it is a fantasy to believe that the economy can grow at a torrid pace \u2014 as measured by GDP \u2014 while simultaneously reducing or eliminating greenhouse gas.<\/p>\n

That\u2019s because the\u00a0\u201cP\u201d in GDP \u2014 production \u2014 necessarily requires energy inputs, which means more burning of fossil fuels unless and until the shift is fully made toward clean energy. That\u2019s not a case for despair, though: By allocating less than half of what world governments spend annually on fossil fuel subsidies to mitigation efforts, we can prevent the above dystopia and improve millions of lives in the process \u2014 especially compared to what\u2019s coming our way if we don\u2019t.<\/p>\n

As COP24 gets underway in Poland, the Institute for New Economic Thinking has released two working papers from prominent economists backing up the increasingly dire warnings from climate scientists. In \u201cEconomic Growth and Carbon Emissions<\/a>,\u201d Enno Schr\u00f6eder and Servaas Storm find empirical evidence that economies can\u2019t continue to grow their GDPs exponentially and bring down carbon emissions in line with the targets set in the Paris Agreement. In moving toward the latter, though, world governments can \u201cimprove overall welfare by redistributing income (and growth) between countries and income groups,\u201d the authors told me via email.<\/p>\n

In order to grapple with the harsh reality of economic growth and climate change, Schr\u00f6eder and Storm argue, governments need new ways of measuring welfare and well-being that don\u2019t rely on GDP growth. (Bhutan, for instance<\/a>, measures \u201cGross National Happiness,\u201d but there are other options as well.)<\/p>\n

Looking at data from the International Energy Association and the Organisation for Economic Co-operation and Development between 1971 and 2015, they dismantle a popular notion that carbon emissions can be \u201cdecoupled\u201d from economic growth. Traditionally the two have moved together; greater wealth leads to greater energy use and fossil fuel consumption, and economic downturns reduce both. Yet studies in the last few years \u2014 including by the World Resources Institute<\/a>\u00a0\u2014 have appeared to indicate that a number of countries, mostly in the Global North, managed to grow their GDP while simultaneously limiting emissions. Hailing similar results, former U.S. President Barack Obama wrote in a 2017 Science<\/a> piece that \u201cthis \u2018decoupling\u2019 of energy sector emissions and economic growth should put to rest the argument that combating climate change requires accepting lower growth or a lower standard of living.\u201d<\/p>\n

While Schr\u00f6eder and Storm find the decoupling story to be the case for territorially bounded production emissions \u2014 those generated within a country\u2019s borders \u2014 including consumption-based emissions paints a very different picture. \u201cEven if we find evidence suggesting a decoupling of production-based CO2 emissions and growth, consumption-based CO2 emissions are monotonically increasing with per capita GDP,\u201d they write. \u201cFaster growth will either mean emission targets will not be met (at all), or alternatively will require even faster technological progress and structural change,\u201d the authors elaborated by email.<\/p>\n

\u201cIn the global climate talks, people avoid talking about the issue how much global economic growth is possible or consistent with these 1.5 degrees emission pathways. It is the hot potato no one dares to touch,\u201d they added.<\/p>\n

In a similar vein, Gregor Semieniuk, Lance Taylor, and Armon Rezai wrote \u201cThe Inconvenient Truth about Climate Change and the Economy<\/a>,\u201d using a macroeconomic model to argue that while theIntergovernmental Panel on Climate Change scenarios largely assume steady economic growth, they undercount potential emissions by ignoring the historic relationship between higher GDP and increased energy usage, which \u2014 in a fossil fuel-based energy system \u2014 means more greenhouse gases spewed into the atmosphere. \u201cIf world output goes up to 3 percent per capita, energy use would go up by 3 percent per capita, and they didn\u2019t get a hold of that,\u201d Taylor said of the IPCC modeling.<\/p>\n

Still, authors of both papers were clear that stymying GDP growth would not entail reducing quality of life. \u201cThis does not mean an across-the-board reduction in standards of living,\u201d Schr\u00f6eder and Storm added. While GDP growth has traditionally been seen as a proxy by economists for economic prosperity, the papers each point out that it\u2019s a poor metric, calling out the \u201crather loose link between GDP and welfare or standards of living.\u201d<\/p>\n

\u201cThe big investments in mitigation have the potential to create new, meaningful and decently paid jobs, reducing unemployment and underemployment,\u201d they said in their email. \u201cThere are many opportunities for increasing standards of living if only one cares to look beyond GDP.\u201d<\/p>\n

Such a scale of mitigation \u2014 in line with the Paris Agreement \u2014 is entirely possible, if politically treacherous. \u201cIt is still possible to limit warming to 1.5 degrees (or 2 degrees),\u201d Storm and Schr\u00f6eder told me. \u201cThere is still time to act (12 years or a bit longer); engineers and earth systems scientists tell us that technical solutions exist, people are creative and can make progress under stress. As Will Steffen put it\u201d \u2014 referencing an interview<\/a> the scientist gave to The Intercept \u2014 \u201ca wartime-like effort could work.\u201d<\/p>\n

Taylor and company assert that spending 6 percent of global GDP on mitigation \u2014 the equivalent of around $2.24 trillion each year on mitigation efforts \u2014 could limit emissions to just the level already baked in, around 1.3 degrees. As they point out, in \u201cabsolute terms, these outlays are large but comparable to other forms of spending.\u201d Referencing a 2017 study from the International Monetary Fund, for instance, direct and indirect subsidies to fossil fuel producers already amount to $5.3 trillion per year. Mind, the IMF calculations cast a wide net in terms of what they consider a subsidy, including the unpaid social cost of carbon and local health impacts. Such spending is also roughly comparable with what world governments spend on the military ($1.74 trillion), itself \u2014 in the case of the U.S. \u2014 a major source of greenhouse gas emissions.<\/p>\n

That spending, they write, will be \u201clarge but lying within the range of macroeconomically feasible reallocations,\u201d in line with the fact that there is \u201cno geophysical reason we can\u2019t limit the global temperature to 1.5-degree,\u201d per the co-chair of the IPCC\u2019s Working Group 3, Jim Skea. Taylor says the results of his team\u2019s research are \u201cguardedly optimistic,\u201d cautioning that \u201cthere are possibilities, but the window is closing.\u201d<\/p>\n

As the the IPCC report and National Climate Assessment have made uncomfortably obvious in recent weeks, doing nothing could be leagues more disastrous, with financial losses potentially doubling those caused by the Great Recession by 2100. Taylor\u00a0and his colleagues map out what they call a \u201ccausal loop\u201d that includes the historical tie (\u201cpositive feedback\u201d) between rising greenhouse gas emissions and rising economic productivity, as well as a looming negative feedback whereby those rising emissions trigger a global depression if allowed to continue unchecked. \u201cNet emissions go up for nearly a century and then trail off in the wake of an output collapse,\u201d researchers find. Taylor noted the risk that a crescendo of climate impacts threatens a \u201creal destruction of physical capital. \u2026 Suppose you get a Category 5 hurricane going up the Houston ship channel. That will hit output directly.\u201d<\/p>\n

\u201cComplications notwithstanding,\u201d he and his co-authors conclude, \u201cunless this loop is severed, it will inevitably lead to worldwide economic collapse.\u201d<\/em><\/p><\/blockquote>\n

The narrative put forth in these two papers stakes out a kind of middle ground between the doomsday accounts<\/a> that crop up around new climate reports and the techno-optimism common among some climate advocates \u2014 that the renewable energy revolution is already upon us, or at least waiting to be unleashed by a few clever market tweaks. \u201cIn the end,\u201d former New York City Mayor Michael Bloomberg told Der Spiegel, \u201ccapitalism is a wonderful thing. It really does drive people to do what\u2019s in their own interest. And that is often good with regard to climate change.\u201d<\/p>\n

Schr\u00f6eder and Storm \u2014 along with advocates of the Green New Deal, which is being backed by a growing number of politicians and civil society groups in the U.S. \u2014 warn against both. \u201c[O]ptimism can lead to self-deception: we make plans and show good intentions, but in actual fact do not (yet) act. But then clearly one can be pessimist as well, when looking at the limited achievements in decarbonization in the past, at the still low level of penetration of renewable energy in the global energy mix and at the lack of political support and political will to decisively act,\u201d they write, referencing the dangers of falling into what economist Albert Hirschman called the \u201c\u2018futility trope\u2019 \u2014 the idea that policy will not work, because it is too late or the problem is too big.\u201d<\/p>\n

The stakes are indeed dire, and barring an enormous, economy-wide course correction,<\/a> the decades ahead could be every bit as miserable as the most doomsday scenarios suggest \u2014 and that the latest IPCC report and National Climate Assessment spell out in painfully clear detail. But the corrective that the Green New Deal and related efforts asserts is that that fate is hardly inevitable \u2014 and eminently avoidable. It won\u2019t be easy, but it\u2019ll certainly be easier in the long run than failing to act at the scale of the problem.<\/p>\n

\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad\u00ad__________________________________________________<\/p>\n

Related:<\/em><\/p>\n