Heads up: I did a podcast with Ezra Klein this week, mostly
focused on inflation — which continues to be an interesting story, throwing
curveballs at all who imagine they have it figured out. But today, I want to
take a break and talk about environmental policy — specifically, the
relationship between protecting the environment and economic growth.
اضافة اعلان
As you may know (although a surprising number of people do
not), the Biden administration has taken a huge step forward in the fight
against climate change. The strategically misleadingly named Inflation
Reduction Act is mainly a climate bill, using subsidies and tax credits to
promote green energy. Environmental experts I follow believe that it is a very
big deal, which, if successfully implemented, will greatly reduce greenhouse
gas emissions. It is not quite as aggressive as the climate plans in Joe
Biden’s original Build Back Better (BBB) legislation, but modelers estimate
that it will accomplish about 80 percent of what BBB was trying to do.
The biggest factor making this kind of climate initiative
possible, after so many years of inaction, is the spectacular technological
progress in renewable energy that has taken place since 2009 or so. This means
that we can greatly reduce emissions using carrots instead of sticks: giving
people incentives to use low-emission technologies rather than trying to
regulate or tax them into giving up high-emission activities. And the politics
of carrots are obviously a lot easier than the politics of sticks.
Strange to say, however, at this precise moment — the most
hopeful moment for the environment, as far as I can tell, in decades — my inbox
has been filling up with woeful claims that environmental protection is
incompatible with economic growth. These claims are oddly bipartisan. Some of
them come from people on the left who insist that the planet cannot be saved
unless we give up on the notion of perpetual economic growth. Others come from
people on the right who insist that we must give up on all this
environmentalism if we want to preserve prosperity.
So let us talk about why such claims are all wrong.
Part of the problem is that many people do not understand
what economic growth means, imagining that it necessarily involves producing
the same things you were producing before, in the same ways, but just at a
larger scale.
But that is not at all what growth means. Currently,
America’s real gross domestic product is about one-third larger than it was in
2007. But the economy of 2023 is not just the economy of 2007 scaled up by
one-third. Production of some goods has gone way down — coal production has
been cut roughly in half. Official growth measures also try to take quality
changes into account: We are producing fewer cars than we were in 2007, but
measured real output in the motor vehicle industry is higher, because
government statisticians believe that recently produced cars are better in
several ways than older models are, and try to estimate how much people would
have been willing to pay for those improvements.
This means that we can greatly reduce emissions using carrots instead of sticks: giving people incentives to use low-emission technologies rather than trying to regulate or tax them into giving up high-emission activities. And the politics of carrots are obviously a lot easier than the politics of sticks.
Above all, real GDP says nothing about how stuff
is produced. A kilowatt-hour of electricity counts the same whether it was
generated by burning coal or wind power, but the environmental impact is completely
different.
As a result, there is no reason a growing economy must place
an increasing burden on the environment. In fact, environmental quality is
often better in rich countries, with high GDP per capita, than in middle-income
countries — a phenomenon the economists Gene Grossman and Alan Krueger dubbed
the environmental Kuznets curve.
Consider, for example, a comparison between the New York
metropolitan area and Delhi. Delhi has a larger population but a much smaller
GDP. So does New York’s big economy mean a highly stressed environment? To take
a very visible indicator, how does air quality in the two cities compare? As
anyone who has visited both places knows, New York air is, well, relatively OK,
while Delhi air … isn’t.
So there is no necessary relationship between economic
growth and the burden we place on the environment. It’s true that the
Industrial Revolution greatly increased pollution of all kinds, and countries
such as India that are still in the early phases of their own economic development
are by and large paying a large environmental price. But at higher levels of
development, delinking growth from environmental impact isn’t just possible in
principle but something that happens a lot in practice.
The invaluable Our World in Data website shows carbon
dioxide emissions per capita in Britain, where the Industrial Revolution began.
The early phases of industrialization were indeed associated with a huge rise
in emissions. But more recently, emissions have fallen back to the levels of
the ’50s — the 1850s.
How did Britain do that? Part of the answer is that over
time the British economy switched from relying on coal to relying on
hydrocarbons, which when burned generate less carbon dioxide. Britain also
learned to use energy more efficiently over time. But more recently, a big
factor has been the rise of renewable energy, especially, in Britain’s case,
wind power.
So when you hear an environmentalist say something like “We
live on a finite planet, so we cannot have unlimited economic growth,” what
they’re actually revealing is that they do not understand what economic growth
means. Furthermore, in practice, they are lending aid and comfort to
anti-environmentalists, who want us to believe that protecting the environment
is incompatible with rising living standards.
That said, although it is possible to decouple growth from
environmental harm, that is not automatic. To combine rising living standards
with an improving environment, we need policies that encourage the use of
technologies that cause less environmental damage.
The good news is that the US is finally implementing such
policies. Still, we need a lot more action along those lines — not just in
America but in the rest of the world. So we can do this — but we need to try,
and not give in to counsels of despair.
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