Growing pressure on the government in China to deal with air pollution may offer the world its best long-term shot of heading off the economic consequences of climate change, a University of Chicago economist said.
Michael Greenstone, arguing in bleak terms to an audience of about 200 at the University of Minnesota on Thursday night, laid out the case for an inevitable rise in global energy consumption as hundreds of millions of people in developing countries join the middle class.
Americans and Western Europeans have so far emitted the largest share of all greenhouse gases, with the U.S. alone accounting for around 22 percent of historic emissions. Per capita energy consumption in the U.S. is four times that in China, and at least 20 times that in India.
But more lights are going on in India and China. Energy use — such as coal-fired electricity — will rise in the world’s two most populous nations. By 2050, they will account for 30 percent of greenhouse gas emissions while the U.S. will account for 16 percent, Greenstone said.
“That’s not to say that the U.S. doesn’t play an important role in all of this, but what it underscores is that where we need the reductions in greenhouse gas emissions going forward are the very places where people are today the poorest, and that is a painful truth about climate change,” he said.
Asking the Chinese and Indians to hold off on development that improves people’s lives — especially after a century in which the Western world pumped out the lion’s share of CO2 emissions — is a non-starter, Greenstone said. Governments subsidize energy in myriad ways that confuse and distort the market. Many economists argue that more money should be spent on research for cheaper green energy.
Warming temperatures will hit countries like India hardest. The number of days each year in the country where the temperature is extremely high, 90 degrees and above, will rise dramatically, Greenstone’s work has shown. At that temperature, more people die and crop yields are hurt.
One key to reducing greenhouse gas emissions is to find a way to set prices for energy that account for these long-term costs. When an audience member asked whether people should just change their lifestyles, Greenstone replied that they will when prices give them an incentive.
“All that stuff is a function of prices,” he said. “Your norms and your this and your that, the way societies are formed and cities are shaped, that’s all a function of the prices we set out and people respond to those prices.”
V.V. Chari, a University of Minnesota economist who presided at the event, added, “Preaching, moralizing, and hoping to change lifestyles by rhetoric alone, we’ve tried that zillions of times. The depressing statement about people is when it finally comes down to making decisions, especially important, pocketbook-oriented decisions, prices, prices, prices, prices. That’s, at the end of the day, what people seem to respond to.”
World leaders now have their eye on a big climate conference in December in Paris.
Greenstone said there is some reason for hope that conference will lead to some progress because Chinese leaders have begun to pay more attention to environmental concerns as air pollution in Chinese cities has become a major domestic issue.
“The political costs of the air pollution are a threat to the regime there,” Greenstone said. “I think if you want to leave this in a slightly happy place, increasing recognition of the threat of air pollution is a path to where we can also do something with climate change.”
Greenstone spoke to the Heller-Hurwicz Economic Institute in the first Jon Goldstein Memorial Lecture on Environmental Policy and Economics.