No — Carbon taxes and green policies harm economic growth and jobs
The close relationships between real gross domestic product, employment and energy consumption for both less and more developed economies mean that policies aimed at reducing greenhouse gas emissions would reduce economic growth and employment. The reason is straightforward: they would increase the cost of conventional energy sharply, writes Benjamin Zycher.
Environmentalists argue that the “safe” limit on people-driven temperature increases by 2100 is 1.5C. The Intergovernmental Panel on Climate Change advocates carbon taxes for 2030 with a midrange of $30 per gallon of petrol in 2019 dollars, rising sharply over the course of the century. The taxes on other forms of conventional energy would be equally destructive economically and preposterous politically.
Advocates of addressing climate change try to avoid this reality by arguing that substitutes for conventional energy are cost-competitive and that a global shift towards a radically different “renewables” energy sector would strengthen growth by engendering new investment and employment in “green” industries.
But unconventional energy is not cost-competitive; why else have massive taxes, subsidies and guaranteed market shares been necessary to make it viable? The unreliability of wind and solar power, the unconcentrated energy content of air flows and sunlight, and the theoretical limits on the conversion of wind and sunlight into electric power are the reasons that greater market shares for renewables have led to higher power prices in Europe and the US.
The argument that investing in green energy leads to stronger growth ignores the serious adverse effects of reduced investment and higher energy costs in other sectors. Favouring unconventional energy will destroy some substantial part of the economic value of the pre-existing energy-using and producing stock of physical and human capital. Earthquakes cannot yield economic benefits; the same is true for policies that wipe out the value of significant parts of the economy. Expensive energy and reduced economic growth cannot be consistent with renewed employment growth after the pandemic.
The International Energy Agency predicts the Covid-19 economic recession will reduce greenhouse gas emissions this year by 8 per cent. If this decline were maintained for the rest of the century, a climate model funded by the US Environmental Protection Agency predicts that the temperature reduction in 2100 would be a bit more than 0.1C. Using the same model, future temperature effects of much larger reductions in greenhouse emissions are of a level that I consider trivial. The 2015 Paris agreement, which can easily be evaded by participating countries: 0.17C by 2100. Zero greenhouse gas emissions by the entire OECD: 0.3C. A 30 per cent cut in greenhouse gas emissions by the entire world: 0.6C. There is no plausible benefit/cost test that would justify such policies.
Inexpensive energy is necessary for economic advancement by the world’s poor and for recovery from the staggering economic effects of Covid-19. Ideological opposition to fossil fuels is an anti-human stance that views ordinary people not as problem-solving sources of ingenuity but as only mouths to feed, producing environmental damage. In this view most investments in people — education, health and so on — make matters worse by increasing the demand for energy.
Many on the environmental left have applauded the fall in greenhouse gas emissions caused by the Covid-19 recession, and expressed not hope for renewed growth, but a fear that emissions will rise again. They assert that an “existential climate threat” looms large. The effects of increasing greenhouse gas concentrations are real, while small; but “crisis” claims are not supported by evidence and rely on models driven by implausible underlying assumptions.
Prioritising climate policy will harm the ability of most people to improve their conditions, particularly after the terrible economic shock caused by the lockdowns. Moreover, if countries have less wealth they will have fewer resources for environmental protection. Ask not whether supporters of greater economic growth hate the planet. Ask instead if environmentalists hate humanity, and the planet too.
The writer is a resident scholar at the American Enterprise Institute