Sunday, January 27, 2013

"Lord Nick" calls for green Keynesian boost

The 2006 Stern Review on the Economics of Climate Change was required reading around these parts in both the specialized GL 4003 Global Change class, whose students had to read the whole thing, in the Economics of Resource Conservation and Sustainability class, and in the Core III class, who were assigned the Executive Summary for that year and a few years after that.

It's hard to remember when I stopped assigning it or quite why, just a nagging feeling after the 2008 election that it was perhaps no longer quite as relevant to American climate policy as it was when it first came out.

The opportunity for a Stern insurance-type solution, investing merely one per cent of GDP per year in renewables and efficiency, probably expired around 2008 or 2009, as the Keeling Curve climbed upwards.

Now we're up to two or perhaps three, four or five percent that would be required. Some effort was made through the 2009 American Reinvestment and Recovery Act, the so-called stimulus package, but it wasn't enough (less than $100 billion), and so we failed to capitalize on some of the investments.

Low gas prices since then, while they may have helped to lower US emissions levels in the short term, have precluded the kind of serious, sustained investments in market-driven initiatives on top of the stimulus that Stern recommended.

You could call this the Tea Party legacy, but Democratic Party politicians too were also involved in helping to kill the 2009 Climate Bill. The major force, of course, is climate denial, but there has also been a wave of popular concern running against any government coordination of the economy, making it very difficult for the Obama Administration to consider any of the several means (direct investments, carbon tax, cap and trade, utility-only carbon price, etc) that could be used to push energy trends in the right direction.

Anyway, Lord Stern or "Sir Nick," as he's known to his merry band of assistants and graduate students, is attending the Davos forum, and has agreed that his own report is now way out of date and may not have been aggressive enough in the first place.

That's all right, Nick. We won't be blaming you when the chips fall. There are other Guilty Men.

(Chief among them the Koch brothers.)

So I guess the Stern Review, for all it's influence, is now a dead letter.

We need an up-to-date economic assessment of the costs and benefits of mitigation, as we go into what is probably our last chance for a climate mitigation bill in the US.

And this bill, if it's really to work, has to be either very aggressive, economically speaking, a real solid Green Keynesian "Climate New Deal" of a trillion dollars or so, or it has to be very very clever in setting up market incentives to allow a similar amount of private money to flow in the right direction, or a combination of both.

And it has to include the beginnings of negotiation for something like an international Green Free Trade Zone, a giant scheme of climate imperial preference or protectionism, requiring countries to charge large tariffs on non-climate compliant goods from outside the zone.

They don't have to come in the same bill. But both are required.

Anything less won't be enough.

PS: A new bicameral congressional task force has been formed to consider the details of any upcoming climate action. See here for the news release.

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