Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.
The New Climate Economy
By Rusty Pritchard
October 6, 2014
The planet and its people are at war. That’s the most popular frame through which to view the issue of climate change—a frame that unites the political left and right. According to conservatives, any effort to forestall climate change threatens economic growth. The progressive view agrees at a fundamental level, seeing capitalism as the enemy of ecological sustainability. An estimated 150,000 people marched this past September in New York City to focus the world’s attention on climate change in advance of the UN Climate Summit. Not many appeared to be fans of the business community.
Yet perhaps the most promising development happened prior to the march. Cutting through the narrative that pits economic growth against climate action was a report issued on the New Climate Economy. Its authors, including former heads of state, corporate executives, and representatives of the world’s major financial institutions, focus on sustaining global economic growth rather than climate action, finding that some investment policies would satisfy both goals.
A perfectly rational society would already have in place a system that puts a price on carbon pollution (either a carbon tax or a system of tradable permits). Special interests have kept that from happening so far. That means private and public investment decisions are being made every day with incomplete information, threatening future prosperity and running the risk of major regrets. Some investments made without a functioning market in carbon pollution will become stranded assets that will be abandoned before the end of their economic life as markets and environmental conditions change. Other assets will continue to operate and be a drain on the economy, representing missed opportunities for economic growth.
The New Climate Economy report makes a clear case that poor investment choices today can lock societies onto uneconomic trajectories, and that much economic misfortune can be avoided by nudging current choices in a different direction. The authors examine three sectors in some detail-- cities, agriculture and forestry, and energy -- where near-term infrastructure investments will be around $90 trillion, and they’re concerned that it is spent wisely.
Cities represent the lion’s share of greenhouse gas emissions, mostly because half the world’s population now lives in them (by 2050 the urban share of world population will be two-thirds). Yet cities vary widely in their urban form and livability. Atlanta and Barcelona have roughly the same population and level of economic wealth. Barcelona is compact and connected, occupying about sixty square miles, while Atlanta is a poster child for pollution and traffic, with a metropolitan area sprawling over nearly 1,700 square miles. To navigate those spaces, each Atlantan on average causes ten times the greenhouse gas pollution that a Barcelonan does. Smarter urban growth makes living in cities healthier and more enjoyable, and shifting pathways often means simply cutting government subsidies for sprawl.
Wasteful subsidies also afflict agricultural investment decisions, the second sector examined by the New Climate Economy. Worldwide, subsidies promote inefficient use of fertilizers, pesticides, and electricity for pumping water; reducing them incentivizes cost saving and pollution prevention, since excess chemicals usually end up contaminating groundwater and downstream water bodies. The report also recommends large-scale restoration of degraded land by governments and development partners, restoring abandoned farms and croplands and thus reducing the need to convert forestland to agriculture.
Finally, a major wave of investment in energy production will occur in the coming years. Global demand for energy has risen 50 percent since 1990, and it is projected to rise by 20 to 35 percent in the next fifteen years alone. Over a billion people in the Majority World lack electricity, and 2.6 billion lack clean cooking facilities. How their energy is produced will have a significant impact on the future well-being of earth’s citizens. And because energy sector assets are particularly long-lived, getting those decisions right is often a one-shot deal. In the United States, environmental interests are accused of waging a “war on coal.” But as the report points out, simply taking a cost-benefit lens to coal’s impact on health and economic productivity means it should no longer get the benefit of the doubt as the world’s go-to source of cheap energy.
The actions recommended in the New Climate Economy are not by themselves going to completely neutralize the threat to prosperity represented by climate change; the authors admit as much. But by focusing on the win-win solutions we ought to be pursuing anyway, the authors reframe the climate fight as one where earth and the economy can be on the same side.
- Dr. Lowell (Rusty) Pritchard is a natural resource economist who works with the conservation and development nonprofit Plant with Purpose.
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Capital Commentary is a weekly current-affairs publication of the Center for Public Justice. Published since 1996, it is written to encourage the pursuit of justice. Commentaries do not necessarily represent an official position of the Center for Public Justice but are intended to help advance discussion. Articles, with attribution, may be republished according to our publishing guidelines.”