Capitalism Can Thrive Without Cooking the Planet
In environmentalist circles, there’s a common trope that for humanity to prevent catastrophic climate change, economic growth must stop. This idea has helped to turn what should be a hard-headed, rational debate into a partisan political one -- many on the right suspect that climate-change activism is a thin veneer for a socialist plot to throttle the economies of the rich world, while some on the left embrace the notion of an inherent contradiction between capitalism and sustainability. But this partisanship is unnecessary, because the trope is wrong. Economic growth is perfectly compatible with cutting pollutants that contribute to global warming like carbon dioxide.
During the past few decades, rich countries in Europe, East Asia and North America have had substantial economic growth. But carbon emissions from most of these countries have leveled off and begun to fall in recent years:
Emissions have fallen a good deal in the U.K., declined modestly in France and are little changed in Japan. These economies have grown by doing more with less -- creating valuable goods and services while pumping fewer greenhouse gases into the atmosphere.
One common objection to these numbers is that they ignore the effect of “outsourcing” emissions to developing countries. China and other poor nations have boosted their economies by becoming the workshops of the world. As such, they have taken over some of the manufacturing, mining and other heavily carbon-emitting activities once done in rich countries. And it’s China and the developing world that now dominate global carbon emissions. So it’s worth it to ask whether rich countries have really become more efficient, or simply shipped their polluting activities overseas.
Fortunately, economists have ways of estimating how much this happens. For example, Kirsten Wiebe and Norihiko Yamano of the Organization for Economic Co-operation and Development have a 2015 paper on exactly this topic. Their approach is to measure how much carbon emissions it takes to produce what each nation consumes.
This is actually a harder task than it appears, because of supply chains. Each product that you consume was produced by combining a bunch of other goods and services -- an iPhone’s price includes the cost of raw materials, sophisticated components, design, marketing, software, etc. Each of those inputs requires carbon emissions to make -- coal to burn electricity to run factories, oil to power vehicles to take software engineers to work and so on. The amount of carbon represented by these lengthy production processes is called “embodied emissions.”
Wiebe and Yamano estimate embodied emissions using a common method. They take data on how much carbon each industry releases in each country, and then use input-output tables to estimate how much each industry adds to the value of each finished product. They then compare each country’s carbon consumption in 2011 with the equivalent figure for 1995.
What they find is a pretty mixed bag. Rich countries that do a lot of mining, such as Australia and Canada, generally tended to increase their emissions during this period, as did countries that are still developing, like South Korea. But mature rich countries with fewer natural resources like the U.K., Germany and Japan mostly saw their carbon usage fall or remain roughly constant.
This is only mildly encouraging. It shows that total carbon emissions can fall, but that increases are more common. And the fact that most rich countries in 2011 were still recovering from the Great Recession should temper our optimism even more.
But Wiebe and Yamano give one big reason for optimism. They find that almost all countries, both developing and developed, consumed many more dollars of value per kilogram of carbon released in 2011 than 16 years earlier. Here’s the picture for eight major developed and developing nations:
The U.S. is the outlier here. Unlike other countries, the U.S. actually used more carbon to generate each dollar of consumption in 2011 than in 1995, suggesting that America really did offshore its carbon emissions to developing nations. This should be a wake-up call for the U.S., since even nations like China and Russia have made dramatic progress on this front. Sadly, the current administration seems to be moving the U.S. in the wrong direction.
But what these numbers show is that economies can get much more efficient in their use of carbon to produce the things people value. That means that reductions in emissions may slow growth a bit, but they don’t have to bring it to a halt. There’s no obvious reasons why these efficiency gains can’t continue -- with solar power becoming much cheaper and energy-storage technology advancing steadily, countries can switch to renewable power and electric vehicles. With proactive national policies to substitute renewables for coal and oil, technological progress will be able to keep the engine of capitalism humming without cooking the planet.
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