Fri, Nov 30, 2018 - Page 9 News List

Climate change, free markets and Marxism

By Adair Turner

The next Brazilian minister of foreign affairs, Ernesto Araujo, is on record as believing that climate change is a plot launched by “cultural Marxists” to stifle Western economies, saying that these nefarious forces’ environmentalist “dogma has been used to justify increasing the regulatory power of states over the economy.”

Given the key role that Brazil has played in past climate change debates, including in forging the 2015 Paris climate agreement, Brazilian president-elect Jair Bolsonaro’s choice of Araujo must disturb anyone who believes that climate change threatens severe harm to human welfare. Coming on top of US President Donald Trump’s withdrawal from the Paris agreement, his appointment threatens progress toward a low-carbon economy.

Part of the response to such conspiracy theorists must be to keep making the scientific case that climate change is occurring and will cause major harm to middle-income countries, such as Brazil (even more than to developed economies). However, it is also important to convince people that combating climate change threatens neither prosperity nor private enterprise.

True, the need to tackle climate change does pose a challenge to simplistic and extreme free-market ideology. Free markets alone cannot cope with the “externalities” that arise when economic activities produce harmful consequences that impose no direct cost on individual producers and consumers. And climate change is the biggest externality of all, with the harmful consequences likely to be suffered by future generations worldwide, rather than primarily by those currently producing and consuming fossil fuels.

As a result, significant public-policy interventions are required. These should include carbon prices, which create incentives for reducing emissions; regulations mandating more energy-efficient buildings, consumer appliances and vehicles; and subsidies to nascent technologies that have not yet achieved the economies of scale required for low-cost production.

Given the need for such interventions, the belief that climate change is a hoax is comforting to anyone who thinks that government must play no role in the economy. US author Ayn Rand’s novel Atlas Shrugged, a paean to entrepreneurship unfettered by environmental or social constraints, is a favorite of climate-change deniers.

However, the public-policy interventions needed to fight climate change pose no threat to responsible private business or to the aspirations of developing economies. A report just published by the Energy Transitions Commission (ETC) — which includes many major businesses and no obvious “cultural Marxists” — describes how to build a zero-carbon global economy at only minimal economic cost by 2060. Such an economy would deliver as many job and business opportunities as those created by today’s fossil-fuel-dependent economy.

This is true for developing countries in particular. For example, India will need to triple its annual per capita energy consumption — currently about 30 gigajoules — to achieve the standard of living of today’s developed world, but it can do so while cutting greenhouse-gas emissions and dramatically cutting the terrible air pollution that blights its major cities. Nobody should be trying to keep any economy down and nobody needs to.

The ETC’s analysis shows that India could increase its total electricity supply from today’s 1,100 terawatt-hours (TWh) to 2,500TWh by the 2030s, with continued rapid growth thereafter, while never building any more coal-fired power stations beyond those already under construction and without incurring a growth penalty. More broadly, a zero-carbon global economy in 2060 would probably consume 4 to 5 times as much electricity as today’s 20,000TWh, delivering improved transport services, air conditioning and cleaner heating to billions of people.

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