|August 04, 2016|
The Sticky Truth about Economic Growth and Climate Change
|That averting climate change will save us money should be a tautology, but for reasons including entrenched interests, it is not. The pre-cautionary principle alone would tell us that we do not want to learn what costs climate change will incur, so better to pay a small premium to avoid the risk at all. Instead, calculated estimates pin the cost of avoiding catastrophic effects from climate change at something like 1% of global GDP. So who will pay for it, and who loses from a more sustainable economy?|
In recent years, several studies have come out running cost-benefit analysis on a policy switch to a clean energy system. Yet, besides governmental 'push' factors, we should not forget market 'pull' factors. Even if there was less of a push by the government to clean up our air and water supply, as well as mitigate climate change, the coal industry is for example changing regardless thanks to cheap natural gas as well as self-inflicted wounds.
While coal mine employment in the U.S. did drop 91,600 in 2011 to 74,900 in 2014, there are now more workers in the solar sector than in oil and gas. So overall, not counting the benefits of lowered air pollution and avoiding climate change, the overall job situation seems to be moving towards net positive. So, case closed? Not quite.
The 16,700 workers that lost their coal industry jobs between 2011-2014 cannot simply drive to the nearest solar panel plant to start work the next day. It is a lot more complicated than that, and always will be. We need to be honest about this, and discuss solutions for the 'losers' of the changing economy to make sure they are actually benefiting. If not, there will always be persistent worries about moving towards renewable energy and improved mobility systems, and that somehow these will cost jobs and crimp our lifestyles. There are several flaws with this line of thinking, but also one sticky truth that should be addressed head-on.
The 'sticky truth' is that these questions will not and should not go away, but the answers should be more convincing. It is tempting to simply say, "Sorry, but any losses from avoiding climate change are losses worth paying for." Sure, that is true from a macroeconomic/global point-of-view, but if we keep ignoring or wishing away the costs and upheavals and the people who suffer from them, a society trying to change will find itself with a smaller coalition than it may wish for.
So-called creative destruction should be welcomed from a larger perspective, but these changes are a boon to some and a bust for others. The key is whether or not retooling of the workforce can take place. There is good news though: we have been here before, and we will be here again, so we can learn from past experiences. According to one estimate, 41% of American workers were employed in the agricultural sector in the year 1900. Today, it is less than 2%, in a country that produces more agricultural goods than ever before, and has a relatively low unemployment rate (<5%).
Political theorist Francis Fukuyama wrote in Political Order and Political Decay (2014), "... societies, especially those experiencing rapid economic growth, do not stand still. They create new social classes, educate their citizens, and employ new technologies that shuffle the social deck." This rapid economic growth is happening, but the 'sticky truth' is that it can often be an unequal growth, which needs to be addressed or ignored at society's peril.
There are other issues as well, including whether or not GDP is the right metric to describe whether or not our planet is and will continue to be inhabitable? Relatedly, how do you apply discount rates to account for so-called inter-generational equity? That is economist-speak for how to value our children having a future versus a cost-effective investment we make today. Either way, a decoupling between GDP and CO2 emissions is being seen in an increasing number of countries, and this if anything tells us that we are on the right path towards a sustainable economy, in the climatic and economic growth senses at least.
There is merit in questioning whether or there is a cost to mitigating and adapting to climate change, and that cost is real, but there are also other fundamental changes shifting the sands nonetheless. Ultimately, the highest cost is the cost of doing nothing. One we cannot and should not afford ourselves the luxury of thinking we can pay for. Next generations certainly will not be able to.