Friday, September 19, 2014

Can Reducing Carbon Emissions Be Free?

Paul Krugman summarizes two recent studies which show that reducing carbon might be cheaper than we have thought.  Those studies show that progress that has been made in the use of renewable energy, largely because of falling costs.  They also report that putting a price on carbon has benefits beyond reducing the cost of damages from climate change.  Public health would also be improved by reductions in illnesses caused by air pollution.  That changes the cost benefit framework that economists have typically used to assess the economics of carbon reduction.  The public health benefit has not been included in most of the cost benefit studies that have been done.  Some will question the inclusion of public health benefits, that are difficult to price, but doing so implies that there are immediate benefits from carbon reduction.  Not all of the benefits go to future generations.  Moreover, any nation can realize that benefit without depending upon carbon reductions by other nations.  We should not postpone actions until we can get an international agreement on carbon reduction.

After reviewing the recent studies which alter the economics of climate change, Krugman describes the major hurdle that we face politically.  Many opponents of climate change suffer from "climate despair" according to Krugman.  They assume that there is a constant relationship between carbon emissions and GDP.  Therefore, we cannot reduce carbon emissions and still have economic growth.  We are familiar with that claim from those who have billions of dollars of fossil fuel reserves on their balance sheets,  but Krugman argues that many on the left believe that we must constrain economic growth in order to reduce carbon emissions.  Krugman's position is that there is not a constant relationship between the amount carbon per unit of GDP.  Its possible to reduce the amount of carbon emitted per unit of GDP.

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