A less costly way to fight climate change
Since the 1990s, climate change has become a fixation for rich-country politicians and elites. It emerged just as the world was witnessing the end of the Cold War. There was relative peace and trust around the globe, with widespread economic growth and swift progress against poverty. In the capitals of Europe, in particular, it felt like most of the planet’s big problems were fixed. Climate change was the final frontier.
Proponents of climate action eagerly advocated the goal of ending reliance on the very fossil fuels that had powered two centuries of astonishing growth. Sure, doing so would cost hundreds of trillions of dollars, but there would always be more growth.
What a naive, narrow-minded world view! Time has not been kind to the foolish idea that climate change was humanity’s sole remaining problem — or that the planet would unite to solve it. Geopolitics and economics mean a rapid global transition from fossil fuels is impossible.
It has long been clear that most citizens of the world never shared this myopic focus on climate change. Despite the immense progress that has been made, in some countries life remains a battle against poverty, hunger and disease. In many more, including India, the top priority is to create more jobs and life-changing growth and development. Outside the most advanced economies, climate change has always — understandably — been a relatively low voter priority.
Leaders from Europe and the United States talk up “net zero” as though it has global support. But this unity is quickly revealed as a mirage. For one thing, the destabilizing axis of Russia, Iran and North Korea is not about to support western efforts to solve climate change. According to Mckinsey, achieving the net-zero target would require Russian climate policies costing $273 billion every year — around three times what Russia spent on its military last year. That just won’t happen.
The geopolitical challenges run even deeper. China’s growth has relied on burning ever more coal. It is now the world’s preeminent greenhouse gas emitter, with the largest increase of any nation last year. Renewable energy made up 40 per cent of China’s primary energy in 1971, but that fell to only seven per cent in 2011 as coal use ramped up. Since then, renewables have inched back up to 10 per cent. Strong climate action could cost China nearly a trillion dollars a year, slowing it down on its journey to becoming a rich nation.
The reality is that most of the world — including powerhouse India and the emerging economies — will continue to focus on becoming richer, often with fossil fuels. Russia and its ilk will ignore the fixation on climate change altogether. And China will make money from selling the West solar panels and electric cars, while only modestly curbing its own emissions.
As rich countries attempt — completely irresponsibly — to export the cost of climate policy to poor countries through carbon adjustment border taxes they will drive a further wedge into an already fractured world. And, despite all the hype, they themselves have less and less money left for the climate fight. Annual growth per person among rich countries declined from four per cent in the 1960s to two per cent in the 1990s. It now hovers just above one per cent. Many rich countries face pressure to spend more on defence, health care and infrastructure, as geopolitical pressures and changing demographics make stability and growth far less certain. Yet across Europe and North America single-minded zealots born in the relative calm of the 1990s continue to push for deindustrialization and immiseration to tackle climate change — including in the world’s emerging economies.
This effort is doomed, not least because carbon reductions need to be sustained across decades and through shifting majorities. The economics of strong climate action were always deficient — a fact now blatantly obvious. More politicians are realizing what former U.K. energy and net-zero secretary Claire Coutinho acknowledged: “You cannot heap costs onto struggling families to meet climate targets.”
European voters are already turning on politicians who in the name of climate change have argued for less growth and prosperity. With six to seven election cycles before mid-century, strong climate policies that could cost each person in the rich world more than US$10,000 a year are doomed. Such policies will make it more likely that voters turn to populist, nationalist leaders who will entirely abandon expensive net-zero targets. Then climate policy will be in tatters.
The world needs a better way forward. The best solution is not to push people to be worse off by forcing a premature transition from fossil fuels to inadequate green alternatives. Instead, we should ramp up investments in green innovation, eventually driving down the cost of clean energy so it is cheaper than fossil fuels. This is a far less expensive way to achieve the transition and will enable everyone, including India and other emerging economies, to want to make the shift.
Rich countries need to wake up and stop hemorrhaging trillions of dollars in self-inflicted climate policies that will be followed by few and laughed at by many and will mainly serve to make China rich. Spending a small fraction of the climate trillions on green innovation would fix climate change and allow us to focus the rest of our resources on education, defence, health care and the many other important challenges of the 21st century.
SINGLE-MINDED ZEALOTS BORN IN THE RELATIVE CALM OF THE 1990s CONTINUE TO PUSH FOR DEINDUSTRIALIZATION.