Business As Usual: Running on Empty
A little over a year ago, Robert Watson, former chair of the IPCC, and two co-authors published a report titled “The Economic Case for Climate Action in the United States.” Based on trends over the past few decades, the authors estimated the current total annual cost in the U.S. of losses from weather events intensified by climate change and health damage from fossil fuel pollution to be $240 billion, which they described as “about 40 percent of current economic growth of the United States economy.”
At around the same time, Mark Jacobson, Mark Delucchi and a carload of co-authors published an article in which they projected damages to health and property in the U.S. from climate change and pollution under “business as usual” to be around eight trillion dollars in 2050. A simple linear extrapolation between the two estimates suggests that the annual cost of climate change is increasing at around an 11 percent annual rate. Based on that extrapolation, the health and property damage cost of climate change can be projected to exceed annual GDP growth by 2026.
But wait. Watson’s 40 percent figure compares average annual damage with some of the better recent years of growth. Even excluding years of recession and stagnation, in which growth was less than $240 billion, the remaining eight of the last 12 years averaged only around $430 billion a year in real GDP growth. Counting the recession and stagnation years, it’s virtually break even.
But there’s more. Part of that economic growth simply reflects expansion of the population. Real economic growth per capita in the U.S. has been even more anemic in the 21st century. Of course this means the cost of damage can be spread more thinly as well but the crucial point is still what happens to per capita income relative to the damage.
The future is hard to predict, so I tried a number of scenarios. First, if per capita growth continues at the rate it has since 2009, the U.S. has already entered the red zone where the cost of climate change exceeds growth by an increasing amount each year. If real per capita growth accelerates to 1.5 percent per annum that fateful point won’t be reached until the year after next. A growth rate of 2 percent would postpone the day of reckoning until 2024, six years before the IPCC deadline for achieving net zero carbon emissions. To make it to 2030 without crossing permanently into the red would require a sustained rate of real per capita growth that hasn’t been achieved since 1960-1970.
One more thing. As Andreas Malm wrote, the global warming effects of fossil fuel consumption are “seriously backloaded” and “substantially deferred.” This year’s climate damage is a consequence of actions taken decades ago and the greenhouse gases emitted today will not have their full impact until decades from now. How does one estimate, then, the contribution to intermediate consumption of the deferred cost of current emissions? How much should GDP be deflated to account for the artificial inflation of nominal value added by waste gases whose cost is off the balance sheet?
Let’s assume that emissions in a given year contribute to 4 percent of climate change costs each year for the next 25 years. Why 25 years and why a constant percentage? Because it is better than attributing all of this year’s cost to this year’s emissions. Who knows? It probably makes more sense that choosing a “market-based” consumption discount rate of 4.3 percent. At any rate, considering the deferred nature of the climate costs moves the year in which GDP growth vanishes back. The 4 percent for 25 years scenario moves it back to 2007. The economy has literally been running on fumes for over a decade. Talk about “degrowth”!
It/s here. It’s not going away. It only gets worse. The question isn’t whether or not one “advocates” degrowth but whether or not one faces the stark reality and acknowledges the expiry of GDP growth and consequently the irrelevance — and, frankly, mischief — of the growth paradigm.
“I’ll be dead so…” that is the real position of business and policy leaders. Not in public. But in their hearts.
Even worse–since wealth inequality has exploded since 2007, the average American is far worse off than they were before the financial crash. No wonder Trump won the election and has found such fertile ground for policies that would have absolutely horrified the overwhelming majority of Americans just 4 decades ago. It’s the economy stupid, and it always has been.
Karl, stop lying. Trump lost the popular vote and one the electoral college which misrepresents power. Clinton won on economic issues vote by vote.
Trump only was able to retain a bit less than the Romney levels due to Court voters and Clinton haters. Clinton lost more of the Obama electorate do to Comey hatch violations and overconfident electorate.
Cities need razed and reduced, fossil fuel production needs culled and bombed.
The key question not addressed by the author is how long the period of “plato oil production” (the last stage of the so called “oil age”, which started around 1911) might last — 10, 20 or 50 years. And the oil age is just a very short blip in Earth history.
Let’s assume that this means less the $100 per barrel; in the past, it was $70 per barrel that considered the level that guarantees the recession in the USA, but financial system machinations now probably reached a new level, so that might not be true any longer. The trillion dollars question is “How long this period can be extended?”
It is important to understand the US shail oil is not profitable and never will be for prices under $80 or so. At prices below that level, it actually produces three products, not two – oil, gas and junk bonds.
I view it as a very sophisticated, very innovative gamble to pressure oil prices down and get compensation for the losses due to large amount of imported oil (the USA export mainly lightweight oil which is kind of “subprime oil” often used for dilution of heavy oil in countries such as Canada and Venezuela, but imports quality oil).
If the hypothesis that Saudis and Russians are close to Seneca Cliff (Saudi prince recently said that Russian are just 10-15 years from it) and that best days of the US shail and Gulf of Mexico deep oil is in the past if true, then “Houston we have a problem”.
That means that in 20 years, or so the civilization might experience some kind of collapse, and the population of the Earth might start rapidly shrinking.