Greening the Global Economy

Greening the Global Economy

Greening the Global Economy

Robert Pollin

A Boston Review Book

The MIT Press

Cambridge, Massachusetts

London, England

© 2015 Massachusetts Institute of Technology

All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher.

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This book was set in Stone by Boston Review and printed and bound in the United States of America.

Library of Congress Control Number: 2015953018

ISBN 978-0-262-02823-3 (hc. : alk paper)

10 9 8 7 6 5 4 3 2 1

d_r0

For Judy Fogg, Jerry Epstein, and Jim Boyce

wonderful PERI co-workers; tremendous friends

Contents

Contents

1 Introduction: The Global Green Energy Challenge

2 Prospects for Fossil Fuels and Nuclear Power

3 Prospects for Energy Efficiency

4 Prospects for Clean Renewable Energy

5 How to Hit the CO2 Emissions Reduction Target

6 Expanding Job Opportunities through Clean Energy Investments

7 A Policy Agenda That Can Work

8 Risk, Ethics, and the Politics of Climate Stabilization

Appendixiendix 1: Estimating Global Costs for Expanding Clean Renewable Energy Productive Capacity

Appendix 2: Model for Estimating Global CO2 Reductions through 20-Year Clean Energy Investment Program

Notes

References

Index

Acknowledgments

About the Author

1 Introduction: The Global Green Energy Challenge

Here is the fundamental challenge we confront with climate change. As of 2012, total annual greenhouse gas emissions were at roughly 45 billion metric tons of mostly carbon dioxide (CO2), along with smaller amounts of methane, nitrous oxide, and other gases. The Intergovernmental Panel on Climate Change (IPCC) estimates that to stabilize the global average temperature at around 60.3º Fahrenheit, which is 3.6º above the pre-industrial average of 56.7º, total emissions will need to fall 40 percent within twenty years, to 27 billion tons annually, and 80 percent by 2050, to about 9 billion tons.¹

We are not on track to meet these goals. If global economic growth follows roughly the trajectory it has taken over the past century, and especially the past fifty years, global emissions will not fall at all, but rather increase persistently with time.

What happens if we fail to meet the IPCC’s emission reduction targets? Nobody knows for certain. But the overwhelming consensus from leading climate scientists is clear about what we should take to be serious possibilities. Climate scientist Kerry Emanuel of MIT has offered the following perspectives in his book What We Know About Climate Change:

There will be more frequent and intense heat waves, previously fertile areas in the subtropics may become barren, and blights may seriously affect both natural vegetation and crops.

Comparatively small shifts in precipitation and temperature can exert considerable pressure on governments and social systems whose failure to respond could lead to famine, disease, mass emigrations, and political instability.

Were the entire Greenland ice cap to melt, sea level would increase by 22 feet, flooding many coastal regions, including much of Southern Florida and lower Manhattan. Eleven of the fifteen largest cities in the world are located estuaries and all would be affected.

The 2005 hurricane season was the most active on record, corresponding to the record warmth of the tropical Atlantic. . . . Globally, tropical cyclones cause staggering misery and loss of life (2012, pp. 55-57).

This book proposes measures to reduce that portion of CO2 emissions produced by burning fossil fuels—oil, coal and natural gas—to generate energy. Climate change cannot be entirely blamed on we humans consuming oil, coal, and natural gas to generate energy. But people consuming fossil fuels for energy can be blamed for about 80 percent of the problem. More precisely, of the 45 billion tons of total global greenhouse gas (GHG) emissions in 2012, about 82 percent resulted from energy production and consumption. This includes about 30 billion tons of CO2 emissions generated by burning oil, coal, and natural gas, equaling about two-thirds of total global GHG emissions.² It also includes about 3 billion tons produced by generating energy from what we can call high-emissions bioenergy sources, including the burning of wood or ethanol derived from corn or sugarcane.³ Producing energy also generates about 4 tons of methane and nitrous oxide emissions, as non-CO2 sources of green gas emissions. Agricultural production is the other major source of GHG emissions, accounting for about 13 percent in total, in about equal shares of methane and nitrous oxide.⁴

Controlling methane and nitrous oxide emissions from agricultural as well as other, smaller sources of emissions will of course be necessary to advance a successful global climate stabilization project. But this book will focus on the roughly 80 percent of the problem that we can solve by burning less oil, coal and natural gas, as well as, to a lesser extent, high-emissions renewables. To achieve this goal, it is plausible to start with the premise that global CO2 emissions will need to fall by at least the same rate as overall GHG emissions—40 percent within twenty years, and 80 percent by 2050. This means that global CO2 emissions will need to be no more than about 20 billion tons by 2035 and 6.7 billion tons by 2050.

The emissions reduction target is the first and most important element of a transformational clean energy project. But to be successful, it is imperative that this project also commit to expanding economic well-being throughout the world. We need to start here with job opportunities. The reason is straightforward. Does someone in your family have a job, and if so, how much does it pay? For the overwhelming majority of the world’s population, how one answers these two questions determines, more than anything else, what one’s standard of living will be. We therefore must explore in depth how any climate stabilization program will impact job opportunities throughout the globe.

There is a widely held belief that protecting the environment and expanding job opportunities are necessarily conflicting goals, that therefore impose severe and unavoidable trade-offs in all regions of the world. This position is wrong. I advance here a unified program that can realistically achieve the IPCC’s emission reduction targets while at the same time generating widespread and broadly shared economic benefits. In particular, this program will expand employment opportunities in all regions of the globe, relative to an economic trajectory that maintains our current dependence on a fossil-fuel dominated energy infrastructure.

It is especially critical that developing countries be able to raise living standards for working people and the poor as the global clean energy transformation proceeds. Reducing opportunities for higher living standards in the name of climate stabilization is simply not viable. Most importantly, there is no reasonable standard of fairness that can justify working people and the poor sacrificing opportunities for rising living standards to achieve climate stabilization. In addition, any climate stabilization program that would entail reducing mass living standards will face formidable political resistance. This, in turn, will create unacceptable delays in advancing an effective climate stabilization program. My aim is to show how the clean energy transformation, employment expansion, and poverty reduction can advance in mutually supportive ways, throughout the world.

The basics of my proposal are simple. The global economy can achieve the IPCC’s twenty-year emissions reduction target if most countries—especially those with either large GDPs or populations—devote between 1.5 and 2 percent per year of GDP to investments in energy efficiency and clean, low-emissions renewable energy sources. The consumption of oil, coal and natural gas will also need to fall by about 35 percent over this same twenty-year period—i.e. at an average 2.2 percent rate of decline per year. In its essentials, just to emphasize again, that is the entire global clean energy program I am proposing.

Of course, many critical issues need to be worked through within this broad framework. To begin with, energy efficiency investments in all regions of the world will need to span each country’s stock of buildings, transportation systems, and industrial processes. Efficiency levels will need to rise, among other places, in office towers and homes, with residential lighting and cooking equipment, and in the performance of automobiles and provision of public transportation. Expanding the supply of clean renewable energy will require major investments in solar, wind, geothermal, and small-scale hydro power, as well as in low-emissions bioenergy sources, such as ethanol from switchgrass, agricultural wastes, and waste grease. Expanding supply from high-emissions bioenergy sources such as corn-based ethanol and wood will not reduce CO2 emissions at all.

There is no reason, in principle, that countries that invest between 1.5 and 2 percent of GDP in clean energy should experience any difficulties in maintaining healthy rates of economic growth. Here again, the reasons are straightforward. To begin with, energy efficiency investments, by definition, generate savings in energy costs. Through these savings, energy efficiency investments pay for themselves, within about three years, on average. Meanwhile, for most clean renewable energy sources, the average costs of providing energy are now at rough parity with fossil fuels. This means that energy consumers who substitute clean renewables for fossil fuel energy sources will not need to pay more to heat and cool their homes and offices, travel by cars, buses or trains, or operate industrial machinery.

Not all clean renewable energy sources are at cost parity with fossil fuels. Solar energy is the most significant case in point. But solar energy costs are falling sharply as increased investment levels spur innovation. The International Renewable Energy Agency (IRENA) estimates that average costs of solar-generated electricity should fall by about 40 percent between 2012 and 2020 and will continue to fall as solar production expands globally.

These new investments in energy efficiency and clean renewable energy will also generate a significant expansion of job opportunities throughout all regions of the globe. As noted above, this fact contradicts the widely-held view that climate stabilization policies must mean job losses for working people. Yet the reality that clean energy investments generate more job opportunities relative to maintaining existing fossil-fuel infrastructures has nothing to do with the environmental benefits of clean energy investments per se. It is rather due to the fact that, in all regions of the world, clean energy investment projects consistently generate more jobs for a given amount of spending than maintaining or expanding a country’s existing fossil fuel energy infrastructure. Research that I have conducted with co-authors has found that this relationship holds in a wide range of countries, at all levels of development, including Brazil, China, Germany, India, Indonesia, South Africa, South Korea, Spain and the United States.

Pushing CO2 emissions down will also generate major environmental and public health benefits beyond those achieved through climate stabilization itself. For example, a survey of thirty-seven studies from around the world found that the health benefits of reducing CO2 emissions would average about $49 for every ton of emissions reduced. By some directly quantifiable economic measures, this benefit level is roughly on par with the climate stabilization benefits themselves.⁵ While this book focuses on climate stabilization and job creation, it is important to also keep in mind these further environmental and health benefits.

Scaling the Clean Energy Investment Project

How much will we need to expand clean energy investment to bring the total within 1.5–2 percent of global