Old News in New Bottles: Economists Say Curbing Climate Change Will HELP Our Economy

It was great to see economists in two separate New York Times opinion pieces recently noting that controlling climate pollution may be economically beneficial rather than restraining growth, as conventional wisdom among economists has held.

Eduardo Porter, a former editorial board member of the Times and current author of its Economic Scene column argued that “This time…advocates [for limiting climate pollution] come armed with a trump card: All things considered, the cost of curbing carbon emissions may be considerably cheaper than earlier estimates had suggested. For all the fears that climate change mitigation would put the brakes on growth, it might actually enhance it.”

This just a few days after Paul Krugman, reviewing the same overview reports but also citing some different supporting evidence than Porter, wrote that “strong measures to limit carbon emissions would have hardly any negative effect on economic growth, and might actually lead to faster growth.”

It is good news that two such distinguished economists are validating new reports that show climate protection is good from a narrow economic perspective –a perspective that doesn’t even count the financial benefits of avoiding climate-change-caused natural disasters. However, it’s distressing that it has taken this long to overcome the flawed conventional wisdom that held that taking steps to cut the emissions harming our health and the environment will lead to lost jobs and high bills. (The reasons it is deeply flawed are addressed in Chapters 4 and 6 of Saving Energy Growing Jobs.)

To see how pernicious this conventional wisdom has been, note the timid tone that shows up at times in both articles: Mr. Porter feels compelled to refer to “the fears that climate change mitigation would put the brakes on growth” while Dr. Krugman says measures to control climate pollution “might actually enhance [growth].” as if this is so surprising.

But the interesting story is: This is not news.

The idea that controlling climate pollution helps the economy is not new. Back in 1981, the Solar Energy Research Institute, a national laboratory now known as the National Renewable Energy Laboratory, published a study that said the same thing. It showed that over the next 20 years, “through efficiency, the U.S. can achieve a full employment economy and increase worker productivity, while reducing national energy consumption by 25%...[in addition] some 20 to 30 percent of this reduced demand could be supplied by renewable resources.” Efficiency is the recognized largest and most effective tool to reduce climate pollution: energy that you don’t need doesn’t require the burning of fuels that constitutes over 80 percent of climate pollution. And renewable energy also has near-zero pollution impact.

While the study did not explicitly look at carbon pollution, the results suggest that we could cut it by about 40-45 percent while adding jobs and growth if we optimize our energy dollars by getting more work out of less energy.

This was not even the first such study: In 1976 Amory Lovins published an article in Foreign Affairs arguing that efficiency and renewable energy technology would cost less and produce more prosperity than continued reliance on fossil fuels and nuclear energy, and predicting a radically different path for energy consumption than anyone else. Conventional wisdom, as propounded by the U.S. Department of the Interior and by essentially 50 out of 50 state utility regulatory commissions, was that energy use would more than double by 2010. (Thirty-eight years later we see that Lovins’ prediction turned out to be very close to where we are now--less than half what conventional wisdom had predicted.)

My more recent analysis, Invisible Energy, not only established that the United States can use energy efficiency to meet aggressive carbon pollution reduction goals of more than 80 percent before 2050 but also that doing so would help remedy much of the weakness in the economy that has still mired half the country (the lower-income half) in recession even today. It also lists 45 other studies dating back from 1975 to 2009 that reached the same conclusions. And the list consisted of just those studies that I was familiar with: serious Internet research would have found hundreds if not thousands of others of high academic quality.

Why is this finding—that solving the climate problem helps promote growth and jobs—so surprising to these economists? Yes, it is true that microeconomic theory says that if you want more of one good—such as environmental protection—you must accept less of other goods. But in economic science, as in all other sciences, such oversimplified models must be tested against observations.

In the real world, we have seen numerous examples, not just in the environmental field, where innovation and new technology (and often also good regulation) have led to new jobs and increased prosperity without serious tradeoffs. For example, over the last 40 years, government research on electronics and communications technology, coupled with the kind of regulation that produced the potential for mobile phones and the Internet, was the same sort of “free lunch” (or as Mr. Lovins has said  “a lunch that they pay you to eat.” )

In 2014, the conclusion that establishing and meeting ambitious climate protection goals helps the economy to prosper is not just a matter of study, but a matter of looking at established practice in some places. States that started on these policies soon after the initial studies were available in 1974-5 —California as a U.S. state and Denmark as a Member state of the European Union (a concept that didn’t even exist at the time)--have showed much more progress than their peers at reducing climate pollution and creating jobs and business opportunities in clean energy than their neighbors and peers.

For some reason, climate deniers and promoters of conventional resources have seemingly been able to marginalize the literature that shows that we would be better off in all ways if we limit climate pollution.

Old news in new bottles, featured by respected non-energy-focused economists such as the New York Times opinion writers, may be just what we need to end the false debate between supporters of business and environmentalists on the value of stopping climate change.

To quote Krugman’s conclusion: “The idea that economic growth and climate action are incompatible may sound hardheaded and realistic, but it’s actually a fuzzy-minded misconception. If we ever get past the special interests and ideology that have blocked action to save the planet, we’ll find that it’s cheaper and easier than almost anyone imagines.”

About the Authors

David B. Goldstein

Codirector, Energy program

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