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Economic change or climate change

Economic change or climate change


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By Carlos Merenson

For ecologists it is no secret that nature relies on balances. If there are balances, there must necessarily be "limits" and an economy with unlimited growth then contradicts this natural tendency, with which the growing environmental and economic crises are largely symptoms of the lack of coordination between the two worlds.


In order to respond to the financial crisis that broke out in 2007, the G20 agreed to hold a series of Summits of Heads of State or Government. The first of these Summits was held in November 2008 in Washington DC. The declaration that emerged from the meeting included a paragraph in which the leaders of the G20 pledged to face other challenges of a critical nature, such as energy security and climate change.

In September 2009, at the conclusion of its third Summit held in Pittsburgh, the declaration stated: We will spare no effort to reach an agreement in Copenhagen through the negotiations of the United Nations Framework Convention on Climate Change. Three months later, in December 2009, the 15th Conference of the Parties of the United Nations Framework Convention on Climate Change was held in Copenhagen, without being able to reach the necessary agreements to avoid dangerous anthropogenic interference in the global climate system. In June 2010, at the end of the fourth G20 Summit held in Toronto, and with the failure of Copenhagen in tow, the following paragraph was included:

We reiterate our commitment to a “green” recovery and sustainable global growth. Those of us who have joined the Copenhagen Accord reaffirm our support for the Copenhagen Accord and its implementation and call on others to join ... we are determined to ensure a successful outcome through an inclusive process at the Cancun Conferences.

As is public knowledge, in Cancun only secondary agreements were reached without being able to provide a concrete and forceful response to this critical challenge posed by the global climate change process.

We have become so used to the news that report the meager results or the failure of the negotiations that take place year after year in the Conferences of the Parties to the Convention, as well as the increases in anthropogenic greenhouse gas emissions. Since 1990, the year established as the basis for the emission reductions of the Kyoto Protocol, the atmospheric concentration of CO2 has grown at an annual rate of 1.5 ppm (parts per million) reaching, at the end of 2009, a concentration of 387 ppm, the highest in the last 2 million years, approaching the critical thresholds steadily, after which serious and irreversible climatic effects can be expected [1].

The continuous rate of growth in emissions contrasts with the reduction targets established after the arduous negotiations carried out in the Convention and its Kyoto Protocol. Today those negotiations are bogged down. There are many causes that can be cited, but there are two facts that should not go unnoticed at the time of balance sheets.

First, the gap between the reduction in emissions necessary to mitigate global climate change defined by scientists [2] and the reduction in emissions that politicians consider feasible to achieve is growing every day. Secondly, the dominant economic thinking, which cannot inspire the adoption of measures that make it possible to mitigate climate change and even less inspire the urgent and necessary change of course towards a course of sustainability. The words of Albert Einstein are worth more than ever here: problems cannot be solved within the mental framework that originated them.

It will not be easy at all then to reverse these trends that point in the opposite direction to that indicated by scientists, even less so when, as the Convention postulates, the reductions must be achieved in a sufficient period of time to allow ecosystems to adapt naturally to climate change, ensure that food production is not threatened and allow economic development to continue in a sustainable way.

The political and economic decisions that lead to higher emissions are fundamentally due to our current inability to disconnect economic growth from carbon emissions. The growth curves in world CO2 emissions and GDP suggest that each increase in GDP corresponds to a parallel record of increased use of fossil fuels and CO2 emissions.


Graphs taken from “Ecological macroeconomics: Consumption, investment, and climate change”, Jonathan M. Harris (Tufts University. USA) - Real-World Economics Review - Issue no. 50, 8 September 2009

In order to establish the degree of correlation between both data series (GDP and emissions), the author has obtained a value of "r" equal to 0.98 for the period 1870-2008.


A pragmatic way of visualizing the process and the causes that define the increase in anthropogenic greenhouse gas emissions is provided by the equation developed by the energy economist Yoichi Kaya, who relates the factors that determine the level of human impact on climate in the form of carbon dioxide emissions. Kaya postulates that there are four factors that define the amount of such emissions: the “carbon intensity of energy” (carbon emissions per unit of energy consumed); the “energy intensity of the economy” (energy consumption per unit of GDP); GDP per capita and population.

While the negotiations in the Convention revolve around ways to reduce the intensity of carbon by modifying energy sources and ways to reduce the energy intensity of the economy by increasing efficiency in its use, little is said, and nothing is said. It is negotiated on the evolution of GDP / capita and the exponential growth of the population. Both factors are preponderant and defining the amount of CO2 emissions. If we apply the Kaya equation to the best carbon and energy intensity reduction forecasts that can be expected for the next 25 years and incorporate the GDP / capita and population growth trends, the end result would be that in 2035 emissions Global CO2 emissions would increase by more than 40% compared to 2007, as calculated by Mariano Marzo, professor of energy resources at the University of Barcelona.

The question then arises if the necessary brake on greenhouse gas emissions can be achieved within the negotiations that are taking place at the international level in the Convention, or if in reality they can only arrive as the result of a broader debate in the field of the economy. A debate in which the dominant paradigm in society-nature relations is analyzed in depth; that questions the current development model and proposes a Copernican change in the sense and direction of our current economic beliefs, among which, the unlimited growth of the economy occupies a central place.

I think it is appropriate to recall the ideas of the Romanian economist and mathematician Nicholas Georgescu-Roegen [3], who argued that Western economic thought is based on a mechanistic conception that leads to expectations of unlimited growth, inevitably generating ecological, social and political crises. A good example of the latter is climate change, as current patterns of production, consumption and economic growth have depended and depend on a greater use of energy from fossil fuels. They will not be able to disengage until we can redefine the very concept of growth, questioning one of its basic macroeconomic nuclei, such as the hypothesis of a continuous and exponential growth in GDP.

Here again the changes will not be a simple task. The unlimited growth of the economy, the Holy Grail on which neoclassical economic conceptions rest, has generated a complex ideological network in which consumerism occupies a central place. To understand the importance of consumerism in modern life, it is enough to recall the thinking of the market analyst Victor Lebow, who shortly after World War II, when the US needed to grow the economy, formulated the solution that became the rule for the whole system:


Our enormously productive economy requires that we make consumption our way of life, that we make the purchase and use of goods rituals, that we seek our spiritual satisfaction, our ego satisfaction, in consumption. We need things to be consumed, burned, replaced and thrown away at an ever faster rate. [4]

The exacerbation of consumption resulted in production patterns based on the concept of "planned obsolescence" and in reinforcement, advertising contributed to "perceived obsolescence", driving both excessive consumption and waste, as means to guarantee an illusory economic growth unlimited.

In the 1970s, in the face of the growth of a current of opinion contrary to the ideas that postulated infinite economic growth, attempts arose to demonstrate that this was possible. Paradigmatic examples are the works of Solow, Stiglitz and Hartwick who tried to establish the necessary conditions to achieve an indefinite economic growth despite the limitations imposed by the finiteness of natural resources, one of whose pillars focused on considering that economic capital could substitute natural capital and that the benefits of technological change make it possible to think of unlimited exploitation of natural resources.

To the production function used by neoclassical models of economic growth, which normally considered two factors: the economic capital stock and the supply of labor, Solow and Stiglitz added the flow of resources used in production and showed mathematically that this flow can be as small as desired, provided that the economic capital is large enough, as proof of the existence of substitution between economic and natural capital.

These theoretical speculations, typical of economists who only consider what is within their closed and inflexible mathematical model, which normally has little or no relation to what happens in the real world, collided with the lapidary criticism formulated by Georgescu-Roegen:

Solow and Stiglitz would not have carried out their magic trick (incorporating the flow of natural resources into the production function) if they had taken into account, first, that every material process consists of the transformation of some materials into others (the elements flow) by some agents (the background elements), and, second, that natural resources are greatly undermined in the economic process. They are not like any other factor of production. A variation in capital or labor can only reduce the amount of waste in the production of a commodity: no agent can create the matter with which it works, nor can capital create the substance of which it is made. [5]

Are artificial and natural capital mutually substitutable, or are they fundamentally complementary and only marginally substitutable for each other? Can the finite natural world support infinite growth of our economy?

For ecologists it is no secret that nature trusts balances. If there are balances, there must necessarily be "limits" and an economy with unlimited growth then contradicts this natural tendency, with which the growing environmental and economic crises are largely symptoms of the lack of coordination between the two worlds.

The Ecological Footprint [6], an indicator proposed, among others, by Mathis Wackernagel, is a good illustration of what the absurdity of conceiving infinite growth in a finite world implies. By associating the Ecological Footprint with the concept of Biocapacity [7] it emerges that, since the 1980s, humanity has placed itself in a situation of overdraft of natural capital, an ecological overdraft by which the annual demand exceeds the resources that can regenerate the earth every year. This overdraft leads to the depletion of natural capital and an increase in the generation of waste, which cannot be remedied with the classic economic formula of substitution between different forms of capital, since there is no import of resources for the planet. A good example is provided by Herman Daly when, when analyzing the problems of production functions that ignore natural capital, he mentions that: Having two or three times as many saws and hammers does not allow us to build a house with half the wood [ 8].

In business, as usual, limiting carbon emissions leads directly to the fall of economic growth, with consequences of recession and unemployment, exacerbating the stagnation of the developing world, hence it can hardly be expected that negotiating on the narrow margin a convention on climate change will achieve the proposed objective of stabilizing greenhouse effect gas concentrations in the atmosphere.

The solution can only come as a result, on the supply side, of changes in energy efficiency and renewable energy sources, and on the demand side, stabilizing the population and modifying consumption patterns, which should be reoriented accordingly. goods to the services of human capital, among others: education, health and recreation. In such a scenario, developed countries have to moderate their consumption levels and developing countries have to reach global averages. In this way, economic growth should be redefined in the concept of “economic progress”, oriented towards improved social and cultural life.

As argued by Jonathan M. USA) in "Ecological macroeconomics: Consumption, investment, and climate change", we have to ask ourselves: Will standard economic theory be able to adapt to these changes? Will the goal of dramatically reducing carbon emissions be achieved without exacerbating unemployment, increasing conflicts between the 'rich' and the poor ', or reducing well-being? The answers to these questions will depend partly on technological potential, partly on technology. social will to modify consumption goals, but also significantly in the approach we adopt to macroeconomic theory.

The option, then, is clear: we strive as before to negotiate emission reduction quotas while we see how their atmospheric concentrations continue to increase, or we strive to change the course of the economy, we seriously face the threat of climate change and we on the path of sustainable development.

The author, Carlos Merenson, is a Forest Engineer, Member of the Argentine Academy of Environmental Sciences, former Secretary of the Environment of the Nation - Original text for Ecopolítica.

References:

[1] In 2008 the rate of carbon emissions slowed down, but they also rose by 1.7% compared to the previous year. Its evolution in the last four decades marks a growth, from the 16.3 Gigatons (Gt) of CO2 in 1970, passing through the 22.3 GtCO2 in 1990 to reaching 31.6 GtCO2 in 2008, the latter is a value that represents an increase of 41% over 1990, the base year of the Kyoto protocol, far from its reduction objective, of 5.2% over the 1990 levels that should be achieved during the first commitment period (2008-2012) .

[2] In its Fourth Report (Climate Change 2007: Synthesis Report, Contribution of Working Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge, United Kingdom and New York, NY, USA: Cambridge University Press. Also available at http://www.ipcc.ch/) the Intergovernmental Panel on Climate Change (IPCC) postulated that to avoid dangerous anthropogenic interference in the global climate system, it was necessary to achieve a reduction in carbon dioxide emissions. carbon on the order of 50 to 85% by 2050.

[3] GEORGESCU-ROEGEN, Nicholas (1996): The Law of Entropy and the economic process, Madrid, Fundación Argentaria.

[4] Lebow, Victor; "Price Competition in 1955"; Journal of Retailing, Vol. XXXI no. 1, pg 5, Spring 1955

[5] Georgescu-Roegen, N. 1979 "Comments on the Papers by Daly and Stiglitz". In V. Kerry Smith, eds., Scarcity and Growth Reconsidered. Baltimore: RfFand Johns Hopkins University Press.

[6] Ecological Footprint: A measure of how much biologically productive land and water an individual, population or activity requires to produce all the resources it consumes and to absorb the wastes they generate using prevalent resource management technology and practices. . The Ecological Footprint is usually measured in global hectares. Since trade is global, the Footprint of an individual or a country includes land or sea of ​​the entire planet.

[7] Biocapacity or biological capacity ("biocapacity or biological capacity"): The ability of ecosystems to produce useful biological materials and absorb waste materials generated by humans, using current management schemes and extraction technologies. "Useful biological materials" are defined as those used by the human economy, while what is considered "useful" may change from year to year (eg the use of corn husks for ethanol production could result in corn husks becoming into a useful material, and thus increase the biocapacity of the maize land). The biocapacity of an area is calculated by multiplying the current physical area by the yield factor and the appropriate equivalence factor. Biocapacity is generally expressed in global hectares as a unit.

[8] "Operational criteria for sustainable development" A text by Herman Daly Translation by Gustau Muñoz http://www.eumed.net/cursecon/textos/Daly-criterios.htm#6


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