Nov 23rd 2018

Climate Change, Markets, and Marxism

by Adair Turner

 

Adair Turner, Chairman of the Institute for New Economic Thinking and former Chairman of the UK Financial Services Authority, is Chair of the Energy Transitions Commission. 

LONDON – Brazil’s new foreign minister, Ernesto Araújo, is on record as believing that climate change is a plot launched by “cultural Marxists” to stifle Western economies. These nefarious forces’ environmentalist “dogma has been used to justify increasing the regulatory power of states over the economy.”

Given the key role that Brazil has played in past climate-change debates, including in forging the 2015 Paris climate agreement, President-elect Jair Bolsonaro’s choice of Araújo must disturb anyone who believes that climate change threatens severe harm to human welfare. Coming on top of US President Donald Trump’s withdrawal from the Paris agreement, his appointment threatens progress toward a low-carbon economy.

Part of the response to such conspiracy theorists must be to keep making the scientific case that climate change is occurring and will cause major harm to middle-income countries such as Brazil (even more than to developed economies). But it is also important to convince people that combating climate change threatens neither prosperity nor private enterprise.

True, the need to tackle climate change does pose a challenge to simplistic and extreme free-market ideology. Free markets alone cannot cope with the “externalities” that arise when economic activities produce harmful consequences that impose no direct cost on individual producers and consumers. And climate change is the biggest externality of all, with the harmful consequences likely to be suffered by future generations worldwide, rather than primarily by those currently producing and consuming fossil fuels.

As a result, significant public policy interventions are required. These should include carbon prices, which create incentives for reducing emissions; regulations mandating more energy-efficient buildings, consumer appliances, and vehicles; and subsidies to nascent technologies that have not yet achieved the economies of scale required for low-cost production.

Given the need for such interventions, the belief that climate change is a hoax is comforting to anyone who thinks that government must play no role in the economy. Ayn Rand’s novel Atlas Shrugged, a paean to entrepreneurship unfettered by environmental or social constraints, is a favorite of climate-change deniers.

But the public-policy interventions needed to fight climate change pose no threat to responsible private business or to the aspirations of developing economies. A report just published by the Energy Transitions Commission (ETC) – which includes many major businesses and no obvious “cultural Marxists” – describes how to build a zero-carbon global economy at only minimal economic cost by 2060. In fact, such an economy would deliver as many job and business opportunities as those created by today’s fossil-fuel-dependent economy.

This is true for developing countries in particular. For example, India will need to triple its annual per capita energy consumption – currently about 30 gigajoules – to achieve the standard of living of today’s developed world. But it can do so while cutting greenhouse-gas emissions and dramatically cutting the terrible air pollution that blights its major cities. Nobody should be trying to keep any economy down, and nobody needs to.

The ETC’s analysis shows that India could increase its total electricity supply from today’s 1,100 TW hours to 2,500 by the 2030s, with continued rapid growth thereafter, while never building any more coal-fired power stations beyond those already under construction, and without suffering a growth penalty. More broadly, a zero-carbon global economy in 2060 would probably consume 4-5 times as much electricity as today’s 20,000 TW hours, delivering improved transport services, air conditioning, and cleaner heating to billions of people.

This will create huge opportunities for investment, job creation, and income growth. Initial subsidies were required to drive the dramatic cost reductions now benefiting wind and solar power. But it is mainly private companies that are now producing wind turbines and solar panels, and it is private investors, submitting competitive bids in power auctions, who are financing renewable power and earning good returns, despite ever-falling prices. Venture capitalists – a group not known for its Marxist leanings – are playing a major role in the development of new battery technologies and electric vehicles.

Market competition is not only compatible with a zero-carbon economy. It is essential. Carbon prices and appropriate regulation can provide the required incentives, but competition among profit-motivated firms is crucial to ensuring that decarbonization is achieved at the lowest possible cost. The market’s capacity for “price discovery,” lauded by free-market thinker Friedrich Hayek and largely ignored by Karl Marx, will be crucial.

Vibrant capitalist economies have always depended on a carefully calibrated balance between government policy and private competition. Franklin Delano Roosevelt’s New Deal of the 1930s significantly extended the previously minimal role of the US federal government. But, rather than holding back growth and destroying private enterprise, it was followed by 30 years of spectacular capitalist development, spreading prosperity as never before and dramatically expanding the ranks of the American middle class.

Ayn Rand’s free-market utopia, so beloved by climate-change deniers, is as detached from real-world complexities, and as likely to produce social and environmental disaster, as simplistic Marxist faith in the inevitable efficiency and incorruptibility of the state.

On the far right, free-market ideologues deny climate change because it threatens their facile economic ideology. And there probably are some on the far left who, as Araújo fears, would like to turn the fight against climate change into a new justification for eliminating private enterprise. Both sides deny reality, and for that reason are certain to be severely disappointed.


Adair Turner, Chairman of the Institute for New Economic Thinking and former Chairman of the UK Financial Services Authority, is Chair of the Energy Transitions Commission. 

Copyright: Project Syndicate, 2018.
www.project-syndicate.org

 


This article is brought to you by Project Syndicate that is a not for profit organization.

Project Syndicate brings original, engaging, and thought-provoking commentaries by esteemed leaders and thinkers from around the world to readers everywhere. By offering incisive perspectives on our changing world from those who are shaping its economics, politics, science, and culture, Project Syndicate has created an unrivalled venue for informed public debate. Please see: www.project-syndicate.org.

Should you want to support Project Syndicate you can do it by using the PayPal icon below. Your donation is paid to Project Syndicate in full after PayPal has deducted its transaction fee. Facts & Arts neither receives information about your donation nor a commission.

 

 

Browse articles by author

More Current Affairs

Jun 11th 2019
Extract: "I noticed this dynamic firsthand a few years ago in Blagoveshchensk, on the Siberian border, just a half-mile from the Chinese town of Heihe. A century and a half ago, Blagoveshchensk was part of China. Then the Cossacks took control of it, along with many other territories in Chinese Outer Manchuria, on behalf of the Russian czar. Blagoveshchensk’s local history museum presents the development of the town after the Cossack takeover as a civilizing mission. The Russians, it seems, still view themselves as superior Westerners. As for Heihe, it got rich a quarter-century ago, after capitalizing on Russia’s post-Soviet disarray to sell cheap goods to then-starving Russians. Its own history museum presents the Cossacks as “hairy barbarians” (Lao Maozi) and lists the towns of Russia’s far east by their historical Chinese names: Blagoveshchensk is Hailanpao, Vladivostok is Haishenwai, and Sakhalin is Kuye. Local behavior reflects these perspectives. At the ferry port, the Russians sneer at the Chinese traders who bring Russian vodka and chocolate to Heihe, while the Chinese move past the Russians as if they do not exist."
Jun 5th 2019
Extract: "....the Constitution, which established the impeachment process as a check on the president’s behavior between elections, says nothing about using it only when politically convenient. Moreover, given the results in 2018, Democratic Party leaders might well discourage making the disposition of the president the key issue in the next election. Most important, a decision not to initiate an impeachment process against Trump could set a terrible precedent. If Trump isn’t impeached for his numerous criminal acts and abuses of power, would impeachment remain a viable check on the presidency? "
Jun 3rd 2019
Extracts: "Sooner or later, all smaller powers dependent on global markets would have to choose a side, unless they are somehow strong enough to withstand both American and Chinese pressure. With China and the US both demanding clarity, even economic giants like the European Union, India, and Japan would be faced with an intractable economic dilemma."
May 24th 2019
Waging a war against Iran, or even thinking of doing so, is sheer madness. Trump has thus far wisely rejected the warmonger National Security Advisor John Bolton’s outrageous advice. Waging another war in the Mideast, this time against Iran, would have not only disastrous consequences for the US but will also engulf our allies from which they would suffer incalculable human losses and destruction. Bolton was the architect behind the devastating war in Iraq in 2003, which inflicted more than 5,000 US casualties and a cost exceeding two trillion dollars, allowed Iran to entrench itself in Iraq, and gave way to the rise of ISIS.
May 24th 2019
The private Tasnim news agency reports from Iran that in a speech to thousands of university students, Iran’s clerical leader Ali Khamenei made an unusual and extraordinary criticism of president Hassan Rouhani and foreign minister Mohammad Javad Zarif over their handling of the 2015 Joint Comprehensive Plan of Action or deal on limiting Iran’s nuclear enrichment program.
May 21st 2019
Extract: "Brexit, after all, is as much a Kremlin project as it is anyone else’s. Putin wants to divide Europeans, and in the UK, Brexit has succeeded in dividing Britons like nothing since the Corn Law debates almost 200 years ago. Putin wants the EU to fragment, and Brexit is causing the biggest crack yet in the bloc’s history. Putin wants to sow doubt about the legitimacy of traditional news sources; pro-Brexit media consistently promote lies as truth and inveigh against reputable papers like the Financial Times as elitist enemies of the people."
May 16th 2019
Iraq’s population when invaded was 26 million. Iran’s population today is 81 million..........Whereas Iraq’s neighbors– Turkey, Iran and Saudi Arabia in particular– had been mauled by Saddam and so did not strongly oppose Bush’s invasion, Shiite Iraqis, many Syrians, the Hazaras of Afghanistan, and the some 40 million Shiites of Pakistan would support Iran.
May 15th 2019
It’s time that economists, pundits, and politicians start looking holistically at life in our times, and take seriously the long-term structural changes needed to address the multiple crises of health care, despair, inequality, and stress in the US and many other countries. US citizens, in particular, should reflect on the fact that many other countries’ people are happier and less worried, and are living longer. In general, those other countries’ governments are not cutting taxes for the rich and slashing services for the rest. They are attending to the common good, instead of catering to the rich while pointing to illusory economic statistics that hide as much as they reveal.
May 8th 2019
"........Meanwhile, Trump is leaving the door open for Russia to come to his aid again in 2020. The White House and congressional Republican leaders have been blocking a bill to secure US elections against foreign attacks. And administration officials have been instructed not to raise the issue of Russian interference with the president, lest it cast a shadow on his legitimacy.  The next phase in this affair is already coming into focus. Barr, with the help of Trump’s golfing buddy Lindsey Graham, the Republican chair of the Senate Judiciary Committee, is now enlisted in peddling the president’s fantasy that the Mueller investigation was a “witch hunt” orchestrated by “deep-state” supporters of Hillary Clinton. Once again, current and former FBI agents will be targeted, either because they expressed criticism of Trump or because they opened a national security investigation into a hostile power’s meddling in the US presidential election (which continued in the 2018 midterms). FBI director Christopher Wray, commenting on the Mueller report, said that the Russians are “upping their game” for 2020. "
May 7th 2019
We are witnessing the loss of biodiversity at rates never before seen in human history. Nearly a million species face extinction if we do not fundamentally change our relationship with the natural world, according to the world’s largest assessment of biodiversity.
May 4th 2019
Accusing Iran of being a rogue country bent on acquiring nuclear weapons, supporting extremist groups and terrorism, persistently threatening Israel, and destabilizing the region in its relentless effort to become the dominant power may well all be justified. The question is, what would it take to stop Iran from its destabilizing activities and help make it a constructive member of the international community, and avoid military confrontation with either the US or Israel or both?
Apr 29th 2019
Some of the most famous scientific discoveries happened by accident. From Teflon and the microwave oven to penicillin, scientists trying to solve a problem sometimes find unexpected things. This is exactly how we created phosphorene nanoribbons – a material made from one of the universe’s basic building blocks, but that has the potential to revolutionise a wide range of technologies.
Apr 28th 2019
Easter visitors to London have found some streets and buildings occupied by “Extinction Rebellion” activists, warning of climate catastrophe and rejecting “a failed capitalist system.” Followers of central bank thinking have seen the governors of the Bank of England and Banque de France warning that climate-related risks threaten company profits and financial stability. Both interventions highlight the severity of the climate challenge that the world faces. But warnings alone won’t fix the problem unless governments set ambitious but realistic targets to eliminate carbon dioxide and other greenhouse-gas emissions, backed by policies to ensure the targets are achieved. Zero net CO2 emissions by 2050 at the latest should be the legally defined objective in all developed economies.
Apr 25th 2019
LONDON – Russian efforts to influence European elections have received plenty of media attention. But the same cannot be said of interference by conservative Christian groups based in the United States, some with links to President Donald Trump’s administration and his former adviser, Stephen Bannon.
Apr 24th 2019
.............the version of the report released is only the start of wide-ranging and intensive House investigations.
Apr 17th 2019
On the night of April 15, 2019, in Paris, the emotions were raw. “Notre Dame is burning, the whole of France is crying, the whole world is crying,” said Archbishop Michel Aupetit of Paris. “It’s terrible, frightening, painful, a tragedy, a nightmare.” “This place leaves no one untouched. When you enter this cathedral, it inhabits you,” said Anne Hidalgo, the Mayor of Paris, in front of the burning monument. “We will rebuild,” said the Rector of Notre Dame, “we will rebuild.”
Apr 15th 2019
High-level political purges are gathering pace in Russia. The latest evidence came in late March, with the arrests of Mikhail Abyzov, a former minister for open government affairs, and – two days later – Viktor Ishayev, a former Far East minister and ex-governor of Russia’s Khabarovsk region. Unsurprisingly, the arrests of such senior figures is having a chilling effect among the country’s elites. The authorities have now arrested or imprisoned three former federal government ministers and a supporting cast of regional officials
Apr 8th 2019
The reaction to this type of paternalism, sensible and well-meant as it usually was, came in the form of petulant populism. Like a child who refuses to eat his spinach, just because his mother claims it is good for him, supporters of Trump, Brexiteers, or Baudet want to give the finger to the politics of virtue. That is why Nigel Farage, the chief promoter of Brexit, likes to be photographed with a glass full of beer and a smoldering cigarette: if the virtuous elite want us to drink less and quit smoking, let’s have another and light up.
Apr 8th 2019
Chinese President Xi Jinping seems to be on a roll. He has sent a rocket to the dark side of the moon, built artificial islands on contested reefs in the South China Sea, and recently enticed Italy to break ranks with its European partners and sign on to China’s Belt and Road Initiative. Meanwhile, US President Donald Trump’s unilateralist posture has reduced America’s soft power and influence. China’s economic performance over the past four decades has been truly impressive. It is now the main trading partner for more than a hundred countries compared to about half that number for the United States. Its economic growth has slowed, but its official 6% annual rate is more than twice the American rate. Conventional wisdom projects that China’s economy will surpass that of the US in size in the coming decade. Perhaps. But it is also possible that Xi has feet of clay.