The Sustainable Economy
Salvation gets cheap
by Paul Krugman
The Intergovernmental Panel on Climate Change, which pools the efforts of scientists around the globe, has begun releasing draft chapters from its latest assessment, and, for the most part, the reading is as grim as you might expect. We are still on the road to catastrophe without major policy changes.
But there is one piece of the assessment that is surprisingly, if conditionally, upbeat: Its take on the economics of mitigation. Even as the report calls for drastic action to limit emissions of greenhouse gases, it asserts that the economic impact of such drastic action would be surprisingly small. In fact, even under the most ambitious goals the assessment considers, the estimated reduction in economic growth would basically amount to a rounding error, around 0.06 percent per year.
What’s behind this economic optimism? To a large extent, it reflects a technological revolution many people don’t know about, the incredible recent decline in the cost of renewable energy, solar power in particular.
Before I get to that revolution, however, let’s talk for a minute about the overall relationship between economic growth and the environment.
Other things equal, more G.D.P. tends to mean more pollution. What transformed China into the world’s largest emitter of greenhouse gases? Explosive economic growth. But other things don’t have to be equal. There’s no necessary one-to-one relationship between growth and pollution.
People on both the left and the right often fail to understand this point. (I hate it when pundits try to make every issue into a case of “both sides are wrong,” but, in this case, it happens to be true.) On the left, you sometimes find environmentalists asserting that to save the planet we must give up on the idea of an ever-growing economy; on the right, you often find assertions that any attempt to limit pollution will have devastating impacts on growth. But there’s no reason we can’t become richer while reducing our impact on the environment.
Let me add that free-market advocates seem to experience a peculiar loss of faith whenever the subject of the environment comes up. They normally trumpet their belief that the magic of the market can surmount all obstacles — that the private sector’s flexibility and talent for innovation can easily cope with limiting factors like scarcity of land or minerals. But suggest the possibility of market-friendly environmental measures, like a carbon tax or a cap-and-trade system for carbon emissions, and they suddenly assert that the private sector would be unable to cope, that the costs would be immense. Funny how that works.
The sensible position on the economics of climate change has always been that it’s like the economics of everything else — that if we give corporations and individuals an incentive to reduce greenhouse gas emissions, they will respond. What form would that response take? Until a few years ago, the best guess was that it would proceed on many fronts, involving everything from better insulation and more fuel-efficient cars to increased use of nuclear power.
One front many people didn’t take too seriously, however, was renewable energy. Sure, cap-and-trade might make more room for wind and the sun, but how important could such sources really end up being? And I have to admit that I shared that skepticism. If truth be told, I thought of the idea that wind and sun could be major players as hippie-dippy wishful thinking.
But I was wrong.
The climate change panel, in its usual deadpan prose, notes that “many RE [renewable energy] technologies have demonstrated substantial performance improvements and cost reductions” since it released its last assessment, back in 2007. The Department of Energy is willing to display a bit more open enthusiasm; it titled a report on clean energy released last year “Revolution Now.” That sounds like hyperbole, but you realize that it isn’t when you learn that the price of solar panels has fallen more than 75 percent just since 2008.
Thanks to this technological leap forward, the climate panel can talk about “decarbonizing” electricity generation as a realistic goal — and since coal-fired power plants are a very large part of the climate problem, that’s a big part of the solution right there.
It’s even possible that decarbonizing will take place without special encouragement, but we can’t and shouldn’t count on that. The point, instead, is that drastic cuts in greenhouse gas emissions are now within fairly easy reach.
So is the climate threat solved? Well, it should be. The science is solid; the technology is there; the economics look far more favorable than anyone expected. All that stands in the way of saving the planet is a combination of ignorance, prejudice and vested interests. What could go wrong? Oh, wait.
◊ Paul Krugman is a Nobel laureate in economics. Publ. here 20.4.2014