Grist has discussed the consensus among most economists that the net cost of solving the climate crisis will be around 1 percent of gross domestic product (GDP). Basically this consensus says that total expenditures in various greenhouse gas emitting sectors will increase by 1 percent for the same economic output if emissions are controlled.
To be fair to economists, these estimates are based on studies that include substantial increases in energy efficiency—even count some of the maintenance and capital savings. They are actually taking a stab at following Amory Lovins’ dictum to count all costs and benefits.
Nonetheless, I think there are some good reasons why the consensus is wrong about there being a net cost at all. I think the overwhelming evidence is that a climate-stable future will have a higher GDP, even before avoided climate disruption is counted.
The main extra benefits economists overlook are the helpful side effects other than mitigating the climate crisis—“positive externalities,” in economic jargon.
For example, about half of all economic activity takes place in climate-conditioned buildings. Greening these buildings could increase[PDF] productivity [PDF] by around 10 percent. Similarly, switching most long-haul freight trucking miles to long-haul freight rail would increase productivity in transportation. Many energy-saving practices in industry, such as reducing scrapping and reducing spills and other types of emitting stoppages, would increase productivity as well. A switch to wind and solar would reduce labor productivity in the electricity sector; the conventional wisdom is that a switch to organic agriculture would do the same in that sector, though I think this is much less certain that people think. At any rate, sectors where productivity would rise greatly outnumber the tiny sectors where it might fall—resulting in a huge net increase, probably greater than 5 percent for the economy as a whole.
Another example would be huge benefits to health. Eliminating or greatly reducing the use of fossil fuels would reduce air pollution, water pollution, and exposure to toxics. A switch to organic and low input agriculture would decrease direct ingestion of toxics, and increase available vitamins and minerals in food. Whether such a switch alone would encourage a switch to healthy increase in the consumption of non-starchy vegetables and fresh fruits I don’t know, but it certainly could be part of policy that accomplished this. Overall, I think it is almost impossible that switching from fossil fuels to renewables and efficiency, that switching from toxic soil-consuming agriculture to non-toxic soil building agriculture, from unsustainable to sustainable forestry, would not increase GDP.
Two last points.
First: Joe Romm, David Roberts, and I all tend to agree (from differing perspectives) that conventional economics tends to greatly underestimate efficiency potential. But I think this is trivial compared to the paybacks from increased labor productivity and better health. In human terms, the latter is more important. But if you are looking at pure money paybacks, the productivity increase from green buildings is really stunning. People who produce literature surveys tend to look over the ranges of productivity increase, shake their heads in disbelief, and use the low end estimates to be on the safe side. But the low end estimates tend to focus on productivity from just one type of improvement. The median productivity estimate is 10 percent; but if you include only estimates that include productivity increases from better lighting and better ventilation and better temperature comfort, 10 percent ends up towards the low end.
My take is that a 10 percent increase for economic activity within green buildings is a 5 percent increase for the economy as a whole, and that productivity improvements in manufacturing and transport more than cancel any productivity losses in electricity and agriculture.
Second, these external benefits end up producing a net increase in GDP even though the conventional consensus underestimates gross costs. I think the gross cost of 1 percent of GDP is low by half. Almost all estimates under the economic consensus used old estimates for speed and intensity of reductions that are now widely agreed to be too low. The one conventional estimate I know of which takes the accelerating rate of climate change into account ends up estimating a need to spend about 2 percent of GDP. But once we take external benefits of phasing out emissions (other than the mitigation of climate change) into account, the effect on GDP still ends up positive—even before we consider that efficiency potential is usually underestimated.
[Update] Minor edits made for clarity.
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amazingdrx Posted 2:50 pm
25 Feb 2009
Now of you contrast the economic growth from green energy job growth, and stable lower energy costs with...
The astronomical economic losses from storms, drought related fire and crop loss, and even just business interuption due to increasing storms, flood, heatwaves and so forth.
This would seem to be a great deal for long term investors like pension and college funds and home and small business owners. Stable long term growth produces financial security.
Dips and bubbles from unatural natural disasters and oil shortage and insider traded "free" markets seems only to benefit the wealthiest 1%. Destroying GDP in the process. A 10 year depression is going to cost a lot of GDP.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Gar Lipow Posted 3:51 pm
25 Feb 2009
What we are suffering today are effects of emissions from ten years ago or more. If we stopped all emissions today and starting drawing down, it would be ten years before we saw any reduction in the rate of climate disaster. Public opinion considers the long term only when costs are extraordinarily low. An immediate gain in productivity is a better argument for winning public support than long term prevention apocalypse. Your approach is better in strict logic, but strict logic does not accomplish much in public discourse.
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biodiversivist Posted 4:12 pm
25 Feb 2009
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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amazingdrx Posted 4:43 pm
25 Feb 2009
The people that vote have a few decades to leave a better situation for their kids and grandkids. Maybe they will agree with reigning in the casino capitalists? And cancel the greed is good nonethic.
Yes, green revolution stands on short term prosperity alone, that's a good thing. Financial security long term and the pursuit of happiness, the quality of life issue can be subtly introduced too though.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Sharon Astyk Posted 4:36 am
26 Feb 2009
At the same time, however, what I think there is a doubt about is whether we have the base capital in both resources and wealth to do it. That is, at a certain point, it becomes impossible to make capital improvements simply because you don't have enough to borrow against the future, or to bear the costs of the infrastructure development.
I've written about this here: http://sharonastyk.com/2009/02/16/910/
I am not certain we are at this point, but I think we may be awfully close to it in some ways. That is, it becomes impossible to economize, because you are so busy remediating your present situation.
I certainly agree "get rich and fix climate change" is a good sell - and maybe it is even necessary. But I think that for the forseeable future, getting rich is not going to happen - and that the backlash and anger against those who told people they could have a new and better economy may end up costing us more than finding ways to sell the much harder case.
Sharon Astyk
Sharon, with dirt under her fingernails.
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Gar Lipow Posted 7:10 am
26 Feb 2009
As to whether it is possible. It is not only possible. It is easy. About 10% of our national income is spent on energy. Another 3% on agriculture. Plus there are non-fossil fuel emisisons from industry such such cement and F5 gases. There is methane from dumps, and from mines. Replacing those with non-emitting technologies will only cost us about 2% more than doing it now with huge paybacks.
Do you really think we can't find 2% of GDP even as current GDP falls? Cut military spending, reverse tax cuts for the rich, put in place a Tobin Tax, or use the governments current capacity to borrow.
Do you think we lack the physical resources? Energy to produce energy? Do you think we don't have the resources to implement the first year of such a program? Because we have a lot of means that pay back their energy input in less than a year. So the first year will save enough energy to let us put use energy in producing capital goods for the second year. And it is not just efficiency improvements. Wind generators and solar water heaters also pay back their manufacturing energy input in less than a year. Other natural resources? If we have energy we can use it to recycle.
Again, I'm not saying "the Green Economy is coming and will make us all rich". I'm saying that if we choose to have a green economy, it will make us rich. And I'm confident that statement is true. I'm just not confident it is the choice we are going to make.
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Jon Rynn Posted 7:33 am
26 Feb 2009
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