Can We Afford to Cut Carbon?
| Author | Robert N. Stavins |
| Position | Albert Pratt Professor of Business and Government at the John F. Kennedy School of Government, Harvard University, and Director of the Harvard Environmental Economics Program |
| Pages | 16-16 |
Page 16 ❧ THE ENVIRONMENTAL FORUM Copyright © 2010, Environmental Law Institute®, Washington, D.C. www.eli.org.
Reprinted by permission from The Environmental Forum®, Jan./Feb. 2010
By Robert N. Stavins
Can We Afford to
Cut Carbon?
Can the nations of the world
address the threat of global cli-
mate change without inflicting unjus-
tifiable damage to their economies?
e answer is “yes,” as I explained
in an essay not long ago in the Wall
Street Journal. If appropriate and in-
telligent policies are employed, the
job can be done at reasonable cost.
Critics argue that U.S. legisla-
tion to cut domestic emissions 80
percent below 2005 levels by 2050
will mean disruptive changes to our
infrastructure and untold economic
damage. But they make a couple of
basic errors. For one thing, they seem
to think we’d have to replace the en-
tire infrastructure quickly, paying
trillions of dollars to shift to cleaner
power. ey also seem to assume that
we have to choose between much
more expensive energy and no energy
at all.
e move to greener power doesn’t
have to be completed immediately,
and it doesn’t have to be painful. e
right transition path will increase
consumers’ bills gradually and mod-
estly, and allow companies to make
gradual, well-timed moves.
How would this work? One way
is via a combination of national and
multinational cap-and-trade systems.
e effect would be to send price
signals through the market — mak-
ing use of less carbon-intensive fuels
more cost-competitive, and provid-
ing incentives for energy efficiency
and stimulating climate-friendly
technological change, such as meth-
ods of capturing and storing carbon,
as well as safe nuclear power.
True, in the short term changing
the energy mix will come at some
cost, but this will hardly stop eco-
nomic growth. As economies have
expanded and matured, they have be-
come more adept at squeezing more
economic activity out of each unit of
energy they generate and consume.
From 1990 to 2007, while world
emissions rose 38 percent, world
economic growth soared 75 percent
— emissions per unit of economic
activity fell by more than a fifth.
Critics argue we can’t possibly in-
crease efficiency enough to hit the 80
percent goal. In a very limited sense,
that’s true. Efficiency improvements
alone, like the ones that propelled
us forward in the past, won’t get us
where we need to be
by 2050. But progress
will not rely solely on
boosting efficiency.
Good policies that
send carbon price sig-
nals through the mar-
ket will bring about a
host of other changes, such as mov-
ing toward greener power sources.
What’s more, making gradual chang-
es means we don’t have to scrap still-
productive power plants, but rather
begin to move new investment in the
right direction.
As for how much this will cost, the
best economic analyses — includ-
ing studies from the Congressional
Budget Office and the Energy Infor-
mation Administration — say such
a policy in the United States could
cost considerably less than 1 percent
of gross domestic product per year
in the long term, or up to $175 per
household in 2020. In the end, we
would be delaying 2050’s expected
economic output by no more than a
few months.
Some of the best economic experts
have validated the wisdom of adopt-
ing climate policies: from Yale’s Wil-
liam Nordhaus, who has supported
moderate carbon taxes to cut emis-
sions as an “insurance policy” against
the most serious consequences of
climate change, to MIT’s Richard
Schmalensee and Columbia’s Glenn
Hubbard, who have endorsed the
climate policy recommendations of
the bipartisan National Commission
on Energy Policy, to Harvard’s Mar-
tin Weitzman, who has argued for
more aggressive policies because of
the risk of particularly catastrophic
outcomes.
e longer we put off serious ac-
tion, the more aggressive our future
efforts will need to be, as greenhouse
gases and carbon-spewing capital as-
sets continue to accumulate. Plants
built today will determine emissions
for a generation. In the steel sector
— where plant lifetimes typically
exceed 25 years — more than half
of all plants in the world are now
less than 10 years old.
e picture is similar
in the cement indus-
try, as well as more
broadly throughout
the economy. For ev-
ery year of delay be-
fore moving to a sus-
tainable emissions path, according
to the International Energy Agency,
the global cost of taking necessary
actions increases by hundreds of bil-
lions of dollars.
e world of tomorrow will be
wealthier and better able to absorb
the costs, but acting sooner will
lower the ultimate costs of achieving
the target, because there will be more
time allowed for gradual transition
— which is what keeps costs down.
Perhaps most important, the costs of
failing to take action — the damages
of climate change — would be sub-
stantially greater.
e moe to greene r
power doesn’t have
to be completed
immediately
Ro ber t N . St avi ns is the Albert Pratt Profes-
sor of Business and Government at the John
F. Kennedy School of Government, Harvar d
University, and Dir ector of the Har vard En -
vironmental Economics Program. He can b e
reached at rob ert_stavins@har vard.edu.
A E P
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