A stable climate or economic growth?

Abstract

The 2015 UN Paris Agreement reinforced and declared compatible the two goals of avoiding dire climate change and maintaining global economic growth, and it specified that technological innovation is ‘critical’ to this joint achievement. Unfortunately, any confidence that near-term global economic growth is consistent with a stabilized climate is severely undermined by empirical evidence. Despite the rapid increase of alternative energies in recent decades, global GDP growth continues to require burning greater quantities of climate-destabilizing fossil fuels. The dim outlook for sufficiently reducing CO₂ while maintaining economic growth is underscored by global data and Germany specific data on the decoupling of GDP from CO₂. This paper summarizes pertinent climate science, substantiates the dependence of economic growth on fossil fuels, and uses the Kaya identity to demonstrate the unfavorable prospects for reducing CO₂ while maintaining GDP growth.

Keywords:

• Economic growth
• climate change
• decouple GDP

JEL:

• Q43
• Q54

Notes

¹ Except where otherwise noted, emissions data come from BP’s ‘Statistical Review of World Energy 2015.’

² While CO₂ is the principal greenhouse gas, it is not the only pollutant that traps heat in the Earth’s atmosphere. I focus on CO₂ because I am examining how economic growth, powered by fossil fuels, is contributing to climate change. The CO₂ emissions and CO₂ atmospheric concentrations not only ignore other greenhouse gasses, but they also do not account for the cooling effect of aerosols released into the atmosphere and the albedo changes that hasten warming, e.g., as ice caps melt, they no long reflect heat back into the atmosphere.

³ The IPCC atmospheric concentration numbers are actually in units of ‘CO₂-equivalent.’ This measure accounts for CO₂, but also the heat-trapping properties of other greenhouse pollutants, the cooling effect of atmospheric aerosols, and the warming effect of albedo changes. On balance, the above stated CO₂ atmospheric concentration of just over 400 ppm indicates more distance from the IPCC 450 ppm threshold than we actually have. As noted below, my analysis in Section 4 accounts for this distinction. Throughout the paper all references to 450 ppm and other IPCC targets refer to CO₂-equivalents.

⁴ Mtoe is ‘millions of tonnes of oil equivalent.’ A ‘tonne of oil equivalent’ is the amount of energy released when a metric ton of oil is burned. The amount of energy derived from other energy sources can be converted to and thus measured in this common unit.

⁵ Since the IPCC intends emission cuts in all greenhouse gasses, other pollutants must also be cut to meet their CO₂-equivalent targets. But because any given quantity of the various greenhouse gasses warms the global temperature by different degrees, it is a simplification to assume that CO₂ must be cut by the same percentage as the other pollutants. I follow Jackson (2011, 228) in making this simplification.

⁶ As of 2012 US emissions were comparable to the levels of the early 1990s. Also contributing to the decline was the significant recession, a shift from coal to cleaner-burning natural gas, and greater efficiency of appliances and cars (Unger 2013). The latter two factors enhanced GDP decarbonization. US emissions rose in 2013 and in 2014, but have not again reached their 2007 peak.