Monday, June 6, 2016

Growth in GDP, Growth in Carbon Emissions: Cause and Effect

There’s a link at Naked Capitalism to a Real News Network debate between Bob Pollin and Peter Victor over whether degrowth is part of the answer to the threat of climate change.  I posted a comment to NC, but it never got posted.  Readers of EconoSpeak might be interested, however, so I’m putting it up here.

To wit:

I put a question about this on a statistics exam a couple of weeks ago, based on recent work by Mir and Storm challenging the so-called Carbon Kuznets Curve.  (Updated from the original comment.)  The evidence that increases in GDP per capita are strongly correlated with increases in carbon emissions per capita is incontrovertible.  If you use a consumption-based rather than production-based metric for emissions, no decoupling is yet visible.

But: correlation is not causation (that was the answer), and the GDP per capita variable is, ahem, not identified.  In fact, from the vantage point of the broad sweep of human history, it seems clear to me that the discovery and exploitation of fossil fuel resources has been a major boon to economic growth.  To put it negatively, if we adhere to the program of reducing fossil fuel consumption (weighted by greenhouse effect) by 8% per year, we are likely to see economic growth here and elsewhere take a major hit.  I realize that Bob Pollin disagrees, and that’s worth exploring at some point, but let’s put that aside for now.

To the extent that decarbonization will have negative effects on measured economic output, what do we do about it?  What bothers me about the degrowthers is that they appear to celebrate this.  Who needs all that nasty GDP stuff?  Let’s simplify our lifestyles and turn economic shrinkage into an opportunity.  I think the unreality of that position, it’s disinterest in how economic collapse is likely to play out in the real world, is frightening.  (Or it’s just sprinkled with fairy dust, as in Naomi Klein’s assurance that we will have both reductions in GDP and an increase in jobs.  Right.)

So I guess I have problems with both sides.  I think it will be difficult to prevent serious economic harm if we mobilize against climate change, and we should do what we can to keep that harm to a minimum.


Peter T said...

We can have an increase in jobs, but a decrease in gdp. As an instance, the world is now fed by just three food export regions: North America, South America and Australia. In all three (and in India and elsewhere), agriculture is essentially soil and water mining, and getting closer each year to depleting these resources. Climate change will bring on depletion faster. So we need to put many more hands back into agriculture - scale down farms, plant trees, inter-crop, drip-irrigate, more natural fertiliser and so on. More expensive food (lower gdp), more farmers.

Peter Dorman said...

PT, more expensive food, all else equal, means higher GDP, assuming inelasticity of demand for food, which is reasonable.

But your larger point is correct in this sector: what appears likely (perhaps unavoidable) is that productivity (GDP per job) will decline significantly in agriculture due to decarbonization. This is a specific example of declining fossil fuel use driving declining GDP rather than the other way around, which is the main idea in the OP.

I doubt that declining productivity will "save" us across the board, however, nor would we want it to.

Would we?

Anonymous said...

Economic growth on a finite planet must stop eventually (there are limits to efficiency). It would be good to get to that point in a controlled fashion rather than its being forced by nature.

Peter is on the right lines in that jobs can increase in a degrowth world but salaries must decrease to compensate. We need a lot less stuff than we want and will have to accept that if we want to do something about environmental degradation, including climate change.

Consumption-based emissions accounting is the way to go, if only we can get an agreed method of doing that.