Economic Growth

How to ensure sustainable growth while also tackling climate change

Mike Cummings
Writer, YaleNews
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Economic Progress

This article is published in collaboration with YaleNews.

Representatives of nearly 200 countries have gathered in Paris this week to address the threat of rising global temperatures. Their goal is to forge an international agreement that will reduce carbon emissions sufficiently to restrict global warming to less than two degrees Celsius above preindustrial temperatures — the United Nations’ target for averting the worst consequences of climate change.

John E. Roemer, the Elizabeth S. and A. Varick Stout Professor of Political Science and professor of economics, argues that it is possible to meet the U.N.’s goal while allowing economies across the globe to grow in a fair and sustainable manner.

Sustainability for a Warming Planet” — a recent book he coauthored with Humberto Llavador, associate professor of economics at Pompeu Fabra University in Barcelona, and Joaquim Silvestre, professor of economics at the University of California-Davis — offers a unique perspective on the challenge of global climate change based on the guiding ethics of egalitarianism and sustainability.

Roemer recently discussed his book and the Paris climate summit with YaleNews.

151127-global co2 emissions carbon climate Statista

What is the core of your argument in “Sustainability for a Warming Planet”?

We propose to model the idea of sustainability in the following way: To ask, “What is the maximal growth rate of human welfare that could be sustained indefinitely, taking into account the effect that carbon emissions have on people’s welfare?” We model human welfare as being a function of what people consume, their level of education, the amount of leisure time they have, how much knowledge has been produced in society, and the quality of the biosphere.

It’s not simply a computation of maximizing the growth of the GNP. The conception of human welfare is comprehensive. We have to take into account the fact that if we produce too many goods with concomitant carbon emissions, welfare will decrease.

In particular, the exercise we engage in, which is relevant today given the upcoming Paris meetings, takes a global perspective. Our principles are egalitarian with respect to the present and future generations, and across regions of the world. We propose how the responsibility for reducing emissions should be shared across regions and generations.

What would that deal look like?

We propose that the only acceptable deal between the global North and South is to maintain the date at which developing countries catch up to developed countries in welfare per capita.

Let’s think of a simple world where there is only China, representing the global South, and the United States, representing the global North. We claim that the agreement between China and the United States will have to take the following form: We must cut back regional emissions in such a way that the date at which China catches up to the United States in standard of living remains unchanged from what it would have been. Let’s suppose that the date were 75 years from now, if we didn’t have to worry about the global emissions problem. If we put a proposal on the table under which China would catch up to the United States in 100 years, China would not accept it: Why should their rate of development be so compromised?  In like manner, if a proposal were to entail that China catch up to the United States in 50 years, Americans would reject it. We claim that the only politically feasible solution is to maintain the date at which the global South and North converge in standard of living, or welfare per capita.

We compute paths of resource use that will maintain that date of convergence, and will not lead to excessive atmospheric concentration of greenhouse gases (over 450 parts per million). Among those paths we find the one that maximizes the growth rate that can be maintained along the path, and indefinitely after developing countries catch up to developed countries in welfare per capita.

Is it possible to continue to grow while meeting the goal of not exceeding a two-degree increase in average temperature?

Yes, it can be done. The good news is that the global North can continue to grow.  There are some who say we must have zero growth; we argue that’s alarmist and untrue. That’s the good news. What some would call the bad news is that developed countries can’t grow more than about 1% per year, subject to maintaining our constraints. Given what the growth rates have been in Europe in recent years, 1% doesn’t sound too bad. Given the growth rate in incomes of most people in the United States over the past 30 years, that growth rate doesn’t sound too bad because their incomes have grown less than 1% per year. Most of the income growth in the U.S. in the past 30 years — almost all of it — has been captured by those at the very top of the income distribution. We argue that if we had equitable growth — growth that is equally distributed across society and doesn’t benefit only the top 1% — then 1% growth is not bad: It entails a growth rate in living standards of 28% over a 25-year generation. Of course, economies in the global South will continue to grow much faster than 1% per year, so that their standards of living converge to those of the global North.

What policies would be necessary to support such a proposal?

Some reallocation of resources would be necessary. We’d have to be investing much more in research and development in order to introduce technologies that reduce emissions per dollar of output. We’d invest more in capital. The use of fossil fuels will have to be phased out.

We should be investing more in infrastructure: the highways, the ports, the electrical grid and so on. We should be investing more in education, especially of those in the lower half of the income distribution. This includes, importantly, pre-school education.

We should increase taxes on the very wealthy. I think we should have wealth taxes, not just income taxes. A general wealth tax would require you to pay a tax on all of your wealth, including stocks, bonds — all assets. If you’re Bill Gates and you have $80 billion of wealth, then you pay a tax on that $80 billion every year. Maybe a small tax, say 1%, but 1% of $80 billion is $800 million.

This would provide a whole new source of tax revenue that could be used to improve our education system, infrastructure, and so on.

What steps should policymakers take today to begin addressing the problem of global warming?

The main step is to put a tax on carbon emissions that will dissuade people from using energy that produces carbon. Suppose our gasoline taxes went up over the next few years to $8 a gallon, which is what Europeans currently pay. This would induce the auto industry to produce cars that travel 50 to 60 miles per gallon, as in Europe. We’d have cars that automatically switch the engine off when you stop at a red light. We’d substitute public transportation for the automobile. Generally carbon taxes will induce people to demand energy sources that provide an alternative to carbon.

An increase in the gas tax would have to be accompanied by some redistributive measures. Perhaps we would use the tax revenue to supplement the incomes of people who can’t easily pay for highly priced gasoline but still have to use their cars to get to work. There are a lot of things that would need to change.

What are the primary challenges to setting the country on this course? 

The first challenge is to get the Republican Party to agree that global warming is a problem. The reason they don’t so agree is because the fossil fuel companies are very important in the financing of their party. Secondly, Republican politicians understand that if we were to introduce the necessary reforms to meet the challenge of climate change, much government action will be required, such as establishing carbon taxes and the redistributing income, policies that are anathema to Republicans.

Until the Republican Party can admit that climate change is a problem, there is little that Congress will do. Obama has done some important things via executive action.   Eventually, I think the Republican leaders will pull their heads out of the sand, or they will be abandoned by voters who come, increasingly, to see the reality of climate change.

What are your hopes for the Paris summit?

I hope that countries will make an agreement to cut back emissions substantially. Over 100 countries have offered proposals of what they will do. The promises would be a beginning, although they are insufficient.

I think one reason that President Obama rejected the Keystone XL pipeline was that he wanted to show, going into the Paris meetings, that the United States is taking steps to address the issue. And he was responding to a large movement, led by environmentalists, opposing the pipeline. Note that Hilary Clinton reversed her previous position, from her State Department days, and came out against Keystone XL, as well. Politicians respond to popular movements. The push from the left by Bernie Sanders may have been important as well. Sanders has garnered more popular support, as an open socialist, than many would have predicted. China and the United States made an agreement last November in which China stated that it would reach its peak in carbon production in 2025, so there has been some cooperation. There needs to be a lot more.

Publication does not imply endorsement of views by the World Economic Forum.

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Author: Mike Cummings is a writer at YaleNews.

Image: A chimney in an industrial area emits vapour. REUTERS/Tim Wimborne.

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