Thursday, October 11, 2018

The Next Recession And Climate Change

Larry Elliott writes that the next recession will be complicated by climate change. The outlook is grim. And the solutions are not as simple as they were during the Great Depression:

The threat posed by global warming means the current crisis of capitalism is more acute than that of the 1930s, because all that was really required then was a boost to growth, provided by the New Deal, cheap money, tougher controls on finance and rearmament. In today’s context, a plain vanilla go-for-growth strategy would be suicidal.

One size will no longer fit all:

There are countries that are prepared to self-immolate their economies in pursuit of growth at all costs. America is one. Australia appears to be another. At the other end of the spectrum are those who say there will be a future for the planet only if the idea of growth is ditched altogether. Politically, this has always been a hard sell, and has become even more difficult now that populations in the west have experienced an entire decade of flatlining living standards.
In the developing world, the problem has been too little growth rather than too much. Tackling global population growth is a no-brainer from a climate-change perspective, and most of the projected increase comes from low-income countries, most notably in Africa. The reason is simple: poor families have more children. Birthrates fall as countries become richer.
Between the two extremes are those who think the circle can be squared by carbon-free growth, made possible by the dramatic fall in the cost of renewable energy. Technology will ride to the rescue, they insist.

But technology alone can't save us:

This sounds like a cost-free (or at least relatively cheap) option, and that’s why almost all politicians pay lip service to green growth. But then they act in ways that make achieving global warming targets harder – by building new roads and expanding airports. And always for the same reason: because doing so will be good for growth. This is called a balanced approach, but it is nothing of the sort. If the IPCC is even close to being right about its timeline, speeding up the transition from fossil fuels to renewables is vital.

So how do we speed up that transition? William Nordhaus -- one of this year's Nobel Economics laureates -- says there's a way -- "if policymakers get serious about a carbon tax set high enough to price oil, coal and gas out of the market." But, as the developing debate in Canada shows, there is increasing pushback to Nordhaus' prescription. And that pushback is worldwide:

Here, though, the breakdown in international cooperation and trust becomes really damaging. Ideally, existing global institutions – the IMF, the World Bank, the UN and the World Trade Organization – would be supplemented by a new World Environmental Organisation with the power to levy a carbon tax globally. Even in the absence of a new body, they would be working together to face down the inevitable opposition to change from the fossil fuel lobby.

What chance is there for a World Environmental Organization?



Toby said...

"Birthrates fall as countries become richer."

Owen, I think that's simplistic. Birthrates fall as women gain rights and financial means. A country getting richer won't do it as long as women are chattel, as long as men insist on large families.

Owen Gray said...

I agree Toby. When women are able to chart their own destinies, birth rates fall.

The Mound of Sound said...

The narrow and powerful special interests weren't caught napping on this one. Decades ago, when we really ought to have been holding this conversation, they were moving to capture our governments and their institutions. Legislative capture led to regulatory capture, driving a deep and powerful wedge between our political caste and their real constituents, the public. Once that essential democratic bond frays it can quickly snap. America's "bought and paid for" Congress is a prime example but so too is Canada's National Energy Board. I remember listening to serious candidates in the last Liberal leadership contest and it was, by and large, a neoliberal coven. They were all in the bag to the Bitumen Barons, none more so that Martha Hall Findlay. There was no ghost of Laurier, St. Laurent, Pearson or Pierre Trudeau to be found when they met.

And so Big Fossil has stitched up its hold on the political caste in every fossil energy producing state. As coal has a lock on Poland so too bitumen has a lock on Canada. At the global level the fossil energy producers have skilfully embedded some $30 trillion of proven fossil energy reserves onto the stock markets and bourses of the world. There's your poison pill. Burst the Carbon Bubble if you dare but know that we'll sink the global economy possibly even making the Great Depression of '29 look like a minor adjustment.

Notables such as Nicholas Stern and the current and previous governors of the Bank of England have been warning of the perilous scope of this Carbon Bubble. At first I thought no one was listening but now I suspect that our political leadership across the West was listening but chose to carry on and look the other way, hoping that catastrophe occurs on the next guy's watch.

I got a glimpse of this resignation in the 2017 World Energy Outlook of the International Energy Agency and last month's projections from OPEC that predict a rosy future for all fossil fuels, including coal, into mid-century. They speak of expanding markets for fossil energy, another 30% or more, that will be akin to adding another India and China's worth of fossil energy consumption. Given that these expanding markets will also be largely the poorer nations of Africa they'll be looking to fill their energy needs with the cheapest, i.e. highest carbon resources available - thermal coal and, yes, bitumen.

Given that we have but 12-years, the blink of an eye in the context of governments, to slash global emissions an unprecedented 45%, how, except with an eye on these emerging dirty energy markets, can anyone explain a prime minister bent on constructing a 60-year bitumen pipeline to the Pacific?

Owen Gray said...

It's insanity, Mound. We know what has to be done -- and we know we are in a race with the clock -- but we party on, knowing the iceberg is dead ahead.

The Mound of Sound said...

The public interest has been discounted into borderline irrelevance, Owen. Yet, like the vivisectionist's anguished dog lovingly licking the hand holding the scalpel, we still elect these people to govern us.

Owen Gray said...

When I was young, I wondered why Mark Twain was so angry during the Gilded Age, Mound. Now I understand where that anger came from and why he had such contempt for Congress.