One of my favorite economics journalists, Eduardo Porter, has a column which appears each Wednesday in The New York Times. His column this week, “Imagining a World Without Growth,” shows that economic growth took off consistently around the world only about 200 years ago and that two things powered it: innovation and lots of carbon-based energy from fossil fuels.
The United Nations climate conference, meeting this week in Paris, is asking all countries to greatly cut back on their use of fossil fuels. Mr. Porter, in an earlier column, described what severe cutbacks in fossil-fuel energy could look like:
- In order to meet the consensus goal of keeping the earth’s atmospheric temperature from rising more than 2 degrees C from preindustrial times (and we’re half way there already), CO2 emissions will have to fall to at most 1.6 tons per year for every person on earth by 2050. This is less than 1/10 of the present U.S. average and less than 1/3 of the present world average.
- Within about 15 years every car sold in the U.S. will have to be electric. By midcentury more than half of the U.S. economy will run on electricity. Up to 60% of power will have to come from nuclear sources.
- To meet these ambitious goals the U.S. will have to decarbonize its energy supply at an average pace of 4% per year for the next 40 years. This is 10 times faster than the Energy Information Administration’s current plan.
- This is not achievable by going after low-hanging fruit such as replacing coal with natural gas in power plants. Rather, for example, carbon capture and storage will have to become widely available starting within about 10 years.
Meeting the goal of limiting the average world-wide temperature increase to 2 degrees C will thus require a severe regimen of regulatory actions which will have negative economic consequences. In fact it is difficult to image how such a strict regimen could ever be put in place or enforced without much public dissatisfaction.
We thus have two options for dealing with global warming. We can ignore it at our peril or we can introduce a market mechanism to change people’s fundamental behavior and attitude about energy use. What market mechanism? A (revenue neutral) carbon tax, of course! How else?