SUSTAINABILITY 2030 CLIMATE CHANGE ARE THE CLIMATE KIDS RIGHT? The current wave of activism will have to be translated into an organised political movement, writes Daron Acemoglu. 40 Business & Finance Quarterly Review Q4 2019
SUSTAINABILITY 2030 CLIMATE CHANGE The increase of greenhouse-gas emissions (GHGs) in the atmosphere has caused average global surface temperatures to rise by almost 1°C over the past century. There is no doubt in the scientific community that these changes are a direct consequence of human activity. Yet it seems increasingly unlikely that we will be able to reduce GHG emissions sufficiently to halt and then reverse global warming. The costs of this failure—rising sea levels, mass population displacement, more frequent extreme weather events, and the spread of new infectious diseases—are expected to be catastrophic, even without considering the truly apocalyptic “tail risks” identified by the late Martin Weitzman of Harvard University. And many of the costs will be borne by today’s young people. Given this, could the “school strike for climate,” an international movement of students and youth activists, be the solution? Yes and no. The world—particularly the United States – needs a wake-up call. Our false sense of comfort—encouraged by disingenuous narratives about geoengineering or other technological silver bullets – needs to be shattered. Marshaling robust responses to massive collective challenges has always required sustained engagement by citizens and civil society. But social transformation also requires new laws, norms, and incentives. Without meaningful legislation, businesses and individuals will not change their ways. And without the emergence of new norms, business will always find ways to circumvent new laws. Legislation and norms therefore must work in tandem to establish new long-lasting incentives. The outrage expressed by today’s young climate activists could drive a change in global norms. But the current wave of activism will have to be translated into an organised political movement to rival the power of the fossil-fuel industry, perhaps by merging with or taking over existing Green parties. The challenge for activists is to elevate climate concerns above all other issues, so that people will support policies to reduce GHG emissions regardless of their other economic, social, and cultural priorities. Only then can the issue’s political center of gravity shift. As matters stand, the current youth movement’s biggest weakness is that it lacks a coherent agenda for decarbonizing economic production. In fact, many young activists regard markets and economic growth as part of the problem. After all, the fossil-fuel industry has long appealed to free-market principles when lobbying against carbon taxes and regulation. But the market could be a powerful weapon for fighting climate change. In fact, there is no reason to think that economic growth must be a casualty of climate action. An appropriately high carbon tax would set a predictable price for the damage that carbon-intensive economic activities inflict on humanity, thereby encouraging firms and households to shift away from carbon-emitting activities. And by signaling that carbon is a major environmental threat, a tax would serve the dual function of encouraging normative change. If a carbon tax is to be effective, however, it would need to be set much higher than the current rate in many countries, which is based on an implicit price of $30-50 per ton of CO2. And even then, policymakers and climate activists will need to go further. While a tax will encourage firms to seek cleaner energy sources, it is not a sufficiently powerful trigger for the development of alternative low-carbon technologies. As such, carbon taxes should be supplemented with well-designed “green subsidies” to firms and researchers developing wind, solar, and geothermal technologies, and to those working on new ways to limit emissions from existing technologies. Like carbon taxes, green subsidies harness the power of the market. It is no coincidence that most of the major technological breakthroughs of the twentieth century—antibiotics, computer technology, the Internet, nanotechnology—came from governments guiding and creating markets. While government-funded research and subsidies were instrumental in shaping incentives, little would have been achieved without the private sector. To see what state support without a robust market mechanism looks like, consider the disastrous experience of the Soviet Union throughout the 1970s and 1980s. Finally, today’s young climate activists should not presume that humanity’s future on this planet depends on stopping or severely curtailing economic growth. A transition to a low-carbon economy certainly will require sacrifices. (Claims that a “Green New Deal” can both reduce emissions and boost employment in the short run are not credible.) But, ultimately, economic growth can benefit from welldesigned green policies. Moreover, policies to tackle climate change may not be sustainable in the absence of growth, given that economic hardship can diminish the public’s support for far-reaching reforms. Nonetheless, the future of growth cannot rest on producing evermore manufactured goods. Our task is to find better, more creative, and less resource-intensive ways to meet the diverse needs of more than seven billion people. Once the transition to a cleaner economy is accomplished, growth can continue without adding to our climate footprint. The climate activists are right to work toward a shared understanding about the need for better ways to produce and consume energy. But, more to the point, we need economic growth itself to continue – and not only to maintain political support for a green policy agenda. In a world where more than one billion people still live in extreme poverty, and where billions more aspire to a higher standard of living, a realistic promise of shared growth will be far more compelling than calls for a halt to economic progress. We owe today’s young activists a huge debt for sounding the alarm. Now, we need to turn their enthusiasm into an institutionalised political force, and develop a blueprint for a potent, well-designed, and productive economic agenda. Markets need not stand in our way. On the contrary, they could be a powerful ally. About the author: Daron Acemoglu, Professor of Economics at MIT, is co-author (with James A. Robinson) of The Narrow Corridor: States, Societies, and the Fate of Liberty. n Carbon taxes should be supplemented with well-designed “green subsidies” to firms and researchers developing wind, solar and geothermal technologies Quarterly Review Q4 2019 Business & Finance 41
Change language