Could Fighting Global Warming Be Cheap and Free?

This just in: Saving the planet would be cheap; it might even be free. But will anyone believe the good news?

I’ve just been reading two new reports on the economics of fighting climate change: a big study by a blue-ribbon international group, the New Climate Economy Project, and a working paper from the International Monetary Fund. Both claim that strong measures to limit carbon emissions would have hardly any negative effect on economic growth, and might actually lead to faster growth. This may sound too good to be true, but it isn’t. These are serious, careful analyses.

But you know that such assessments will be met with claims that it’s impossible to break the link between economic growth and ever-rising emissions of greenhouse gases, a position I think of as “climate despair.” The most dangerous proponents of climate despair are on the anti-environmentalist right. But they receive aid and comfort from other groups, including some on the left, who have their own reasons for getting it wrong.

Where is the new optimism about climate change and growth coming from? It has long been clear that a well-thought-out strategy of emissions control, in particular one that puts a price on carbon via either an emissions tax or a cap-and-trade scheme, would cost much less than the usual suspects want you to think. But the economics of climate protection look even better now than they did a few years ago.

On one side, there has been dramatic progress in renewable energy technology, with the costs of solar power, in particular, plunging, down by half just since 2010. Renewables have their limitations — basically, the sun doesn’t always shine, and the wind doesn’t always blow — but if you think that an economy getting a lot of its power from wind farms and solar panels is a hippie fantasy, you’re the one out of touch with reality.

On the other side, it turns out that putting a price on carbon would have large “co-benefits” — positive effects over and above the reduction in climate risks — and that these benefits would come fairly quickly. The most important of these co-benefits, according to the I.M.F. paper, would involve public health: burning coal causes many respiratory ailments, which drive up medical costs and reduce productivity.

And thanks to these co-benefits, the paper argues, one argument often made against carbon pricing — that it’s not worth doing unless we can get a global agreement — is wrong. Even without an international agreement, there are ample reasons to take action against the climate threat.

But back to the main point: It’s easier to slash emissions than seemed possible even a few years ago, and reduced emissions would produce large benefits in the short-to-medium run. So saving the planet would be cheap and maybe even come free.

Enter the prophets of climate despair, who wave away all this analysis and declare that the only way to limit carbon emissions is to bring an end to economic growth.

You mostly hear this from people on the right, who normally say that free-market economies are endlessly flexible and creative. But when you propose putting a price on carbon, suddenly they insist that industry will be completely incapable of adapting to changed incentives. Why, it’s almost as if they’re looking for excuses to avoid confronting climate change, and, in particular, to avoid anything that hurts fossil-fuel interests, no matter how beneficial to everyone else.

But climate despair produces some odd bedfellows: Koch-fueled insistence that emission limits would kill economic growth is echoed by some who see this as an argument not against climate action, but against growth. You can find this attitude in the mostly European “degrowth” movement, or in American groups like the Post Carbon Institute; I’ve encountered claims that saving the planet requires an end to growth at left-leaning meetings on “rethinking economics.” To be fair, anti-growth environmentalism is a marginal position even on the left, but it’s widespread enough to call out nonetheless.

And you sometimes see hard scientists making arguments along the same lines, largely (I think) because they don’t understand what economic growth means. They think of it as a crude, physical thing, a matter simply of producing more stuff, and don’t take into account the many choices — about what to consume, about which technologies to use — that go into producing a dollar’s worth of G.D.P.

So here’s what you need to know: Climate despair is all wrong. The idea that economic growth and climate action are incompatible may sound hardheaded and realistic, but it’s actually a fuzzy-minded misconception. If we ever get past the special interests and ideology that have blocked action to save the planet, we’ll find that it’s cheaper and easier than almost anyone imagines.

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The concept of "secular stagnation" — that the economy may be facing a protracted period of low growth and high unemployment — has been seeping back into economic and policy discourse. Once relegated to the margins of heterodox economic theory, the idea of stagnation as a likely ongoing direction for the economy, in fact, is now virtually mainstream, expounded by such well-known figures as Lawrence Summers and Paul Krugman.

Stagnation, however, is not a new problem. Careful examination of the U.S. economy over the last century suggests that stagnation may not be the exception but just possibly the rule of modern economic performance — a rule that was mainly broken only by the stimulus effects of massive military expenditures at three crucial junctures.

Major economic floundering in the first quarter of the 20th century was relieved by the boost World War I gave to the economy, and the tremendous economic collapse in the second quarter was ended by World War II's huge increase in military spending. In the third quarter, the Korean War, the Cold War and the Vietnam War added major stimulus at key times.

Moreover, several of the indirect consequences of World War II — including wartime savings, the compression of wages, the strengthening of unions, the GI Bill that educated millions of veterans, and the reconstruction of Europe, together with the fact that major competitors had been temporarily destroyed by war — all contributed to the third quarter's great economic boom.

The modern trend, despite Iraq, Afghanistan and other smaller-scale wars, is also clear. Defense expenditures declined decade by decade from a Korean War high of 13.8% of the economy in 1953 to 3.7% in the 2000s, with steadily reduced economic impact. The financial bubbles in the late 1980s, 1990s and early 2000s produced only partial and highly unstable upswings that masked the underlying decline.

The notion that stagnation is far more important than is commonly understood has been bolstered by Thomas Piketty's landmark book "Capital in the Twenty-First Century," which also emphasizes just how unusual the era of the Depression and two world wars was. Piketty's analysis suggests that the high growth rates of the post-World War II period were, by and large, an aberration. "Many people think that growth ought to be at least 3 or 4 percent a year," he wrote. "Both history and logic show this to be illusory."

Viewed in this light, the latest long-range projections from the Organization for Economic Cooperation and Development, the Paris-based intergovernmental group for advanced economies, make for sobering reading. In a new report, "Policy Challenges for the Next 50 Years," the OECD warns that economic growth in the world's advanced industrial economies — including Europe, North America and Japan — will likely slow even further from historic levels over the next half-century, while inequality will rocket to new heights and climate change will take an increasingly damaging toll on world GDP.

According to the projections, the OECD member nations' annual average contribution to global GDP growth will steadily fall from 1.19% this decade to 0.54% between 2050 and 2060. Meanwhile, inequality in these countries may rise as much as 30% or more.

The OECD projections are, if anything, optimistic, since they assume that Europe and the United States each will absorb in the neighborhood of 50 million new immigrants over this period — an assumption that may run contrary to the restrictive politics of immigration playing out on both sides of the Atlantic.

The economic remedy for stagnation is relatively straightforward — in theory: Faltering demand could be offset by large-scale government spending on infrastructure, education and other much-needed investments. In practice, however, it is painfully clear that large-scale Keynesian policies of this kind are no longer politically viable.

The implications of the emerging possibility of a sustained period of stagnation are profound. Through the repeated economic downturns of recent U.S. history — 11 since 1945 alone — the expectation of eventual sustained recovery has been the critical assumption underpinning both politics and policy. An era of stagnation would undermine the economic basis of traditional political hope of both left and right. It would mean ongoing high unemployment, ongoing deficits, ongoing struggles to fund public programs and, in all probability, ongoing and intensified political deadlock and wrangling as unemployment continues, deficits increase and a profound battle over narrowing economic possibilities sets in.

If stagnation is the new normal, we will likely be forced to reassess the fundamental assumptions of politics and the economy and to ultimately get serious about restructuring our faltering economic system in more far-reaching ways than most Americans have contemplated.

Op-ed: The New Polytechnic: Preparing to Lead in the Digital Economy

Think about what is going on right now, all around you. There are satellites above us collecting data on air movements, sensors below us collecting data on ground movements, and cameras all around us collecting data on our movements. Medical devices are measuring heartbeats, and communication devices are receiving and sending tweets, emails, text messages, and GPS signals.

Data is being generated by each of us, about each of us, and collected all around each of us. It is the new natural resource of the 21st century. As with all valuable resources, it is important how we generate it, how we mine it, how we manage it, how we preserve it, and how we connect it.

This extraordinarily rapid expansion in the creation, availability, and interconnectivity of data from multiple sources, and the ever more powerful analytical and computational capacity that is generating new information from this deluge of data, is causing a significant transformation globally in the way we make discoveries, make decisions, make products, make connections and, ultimately, make progress. It is altering all aspects of curriculum and research at universities such as Rensselaer Polytechnic Institute.

The ability to aggregate, integrate, validate, structure, and fully use the burgeoning mass of information available will define success in this data-driven future – including for universities.

A new way of working and learning is required – what I have called the “New Polytechnic” – collaborating across disciplines and sectors and regions to harness the power of these tools and technologies to address the key intersecting challenges and opportunities of our time: in energy security, health, food, water, and national security, as well as the linked challenges of climate change and allocation of scarce resources so critical to our future.

In the “New Polytechnic,” universities must collaborate more effectively with businesses and governments to link the capabilities of advanced information technologies, communications, and networking – to the life sciences, and the physical, materials, environmental, social, cognitive, and computational sciences.

We also must prepare the next generation to succeed and lead in this new world. Students need to acquire new skills for this digitally interconnected environment, including the ability to “translate” between and among disciplines and sectors. They must learn to operate effectively and ethically in virtual communities, immersive environments, and in blended worlds.

At Rensselaer Polytechnic Institute, we are transforming ourselves to develop and use these new tools and technologies so that our faculty and students can apply them to answer the great global challenges.

We are incorporating data literacy across the curriculum, and throughout our research. We are using digitally created immersive environments and multiplayer games, and artificially intelligent characters to teach and to learn.

We launched The Rensselaer Institute for Data Exploration and Applications – or The Rensselaer IDEA – bringing together talents and strengths in web science, high-performance computing, cognitive computing, data science and predictive analytics, and immersive technologies – and linking them to applications at the interface of engineering and the physical, life, and social sciences.

In addition, we now have the most powerful university-based supercomputer at a private American academic institution; IBM’s Watson computer has enrolled at Rensselaer to expand its cognitive computing skills; a Rensselaer professor is leading the U.S. in a global effort – the Research Data Alliance – to enable scientists to access, combine, and preserve research data; and we have partnered with Mount Sinai’s Icahn School of Medicine to push the boundaries of data-driven health research.

Interlinking all of these components and more, we are taking an interdisciplinary approach that will impact research and teaching in powerful new ways. We are educating our students – the next generation of discoverers, innovators, and entrepreneurs – to make a difference in this context. We are modeling the future.

The great universities of the 21st century will remain the physical crossroads where creative people interact across the disciplines and great ideas emerge from these connections. However, in this new digital era, the interconnections will be more global, the pace more rapid, the scale more complex, and the opportunities to change the world more immediate.

Exports have reached new record levels as it arose, but imports have exceeded as well as its prior highs and thread of shockingly high deficits is almost unchanged.  Due to this some scientists say that the recovery will only make the gap grow.  The UK continues to import more than they export and are carrying a perpetual trade deficit.

The UK has balanced its trade deficit with income from abroad for a period of time.  Many companies and investors who own assets in foreign lands and send back the gains to UK are still enjoying the legacy of the empire.

The positive result on UK’s present account has decreased harshly since the financial crash, but, and the future looks less hopeful.

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HSBC’s chief economist, Stephen King, is also affected by 5% deficit.  He argues that that should be down to zero or positive in the aftermath of a severe recession.

King’s concern is that deficits grow in times when many shoppers consume more imported goods than ever.   Much better to start from a situation of balance or even a positive balance sooner than the situation worsens.

An appropriate recession, one in which declining wages or mass unemployment that eradicate people’s incomes in total, lessen the import bill noticeably.  It is a land that can be seen in Greece, Spain and Portugal, where the horrendous economic and financial conditions they find themselves in have at least improved the trade balance.

The Keynesian answer to the crisis in the UK implemented by Labour and partly sustained by the coalition supports employment and public services; however, as well has the unlucky consequence of preserving high levels of imports.  That is the reason the enormous deficits run up by successive governments during and after the recession required to be offset by a major jump in exports.

Regardless of a 25% drop in the significance of sterling, the increase was just small.  There are many rival explanations for the reason.  The dependence on the EU, which separate from Germany has resisted development since 2008. The inclination for exporters to jack up their prices instead of the increase production as an answer to higher demand is one more long-term problem.

Both give slight motive to expect that an economy that month on month runs a historic elevated deficit previous to the upturn has achieved actual momentum, and with imports increasing further, can evade a mini sterling crisis.

Doomsayers disagree Britain has 18 months to two years to discover its export mojo ahead of it is becoming crystal clear a lower pound is needed.  A minor pound would give exporters another increase and perhaps close up the deficit, however, would as well elevate import prices and inflation.  Higher inflation, joined with a consumer boom that is mostly based on additional borrowing, may perhaps oblige the Bank of England to jack up interest rates.  Whatever supporters of higher rate dispute, a speedy and vicious response from the central bank is unwanted and would convey the recovery to a shaky halt.

OXFORD -- The smoke emanating from outdoor wood-burning furnaces can lie thick and low. Rather than rising and dispersing, it can spread out, leaving smoky particles hanging about.

In a time when indoor cigarette smoking is all but forbidden and greenhouse gases are a common concern, there are 500 to 1,000 wood furnaces in the state, the Department of Energy and Environmental Protection estimates, and they are largely unregulated.

That's about to change.

The federal Environmental Protection Agency recently announced it will start regulating the amount of air pollution emitted from wood furnaces, wood stoves and wood pellet stoves in 2015. But talk to people who sell and use wood-fired heating sources, and you'll come away with the view that much-maligned outdoor wood boilers might be doing the environment a favor. Advocates of the wood boilers claim people who burn gas and oil for heat are ruining the planet.

Jeff Luff sells outdoor wood boilers out of an office building that he and his wife, Claudia, own on Christian Street in Oxford. "Twelve thousand square feet, and it's all heated with wood," Luff said. "I can tell you're just overcome with the smoke," he added with smirk.

Indeed. On the north side of the building that's home to a number of other small businesses besides Luff's operation, is a large outdoor wood boiler. It was 18 degrees in the shade, and the shed-sized unit was keeping the entire two-story building toasty warm. The boiler was vented by a 25-foot stovepipe from which only a faint blue wisp could be detected.

The new EPA regulations will not apply to fireplaces, outdoor fire pits, barbecues or pizza ovens. Existing wood-burning appliances would be grandfathered in, but those manufactured in 2015 and beyond would have to meet far stricter pollution standards. The current EPA regulations allow indoor stoves to emit 7.5 grams of particulate matter an hour.

"A cigarette is 0.5 grams an hour," said Tom Swan, owner of Black Swan Hearth & Gift Shop in Newtown. "I sell stoves that release 0.8 of a gram of pollution an hour. That's less than two cigarettes."

Old stoves, he points out, can release as much as 40 grams of smoke an hour. New stoves, he said, are much cleaner. Swan, who acted as a liaison between the wood stove industry and the EPA while it worked on 2015 regulations, said it's the older wood furnaces that are a problem. "There are new wood furnaces that are cleaner than fireplaces," Swan said. To be sure, the horror stories heard from some living downwind of outdoor wood boilers are real. People's lives have been up-ended by a wood-burning unit up the street.

The change in EPA rules can't come soon enough for Wilson Converse, of Weston, and his wife, Suzan. The Converses live across the street from a wood-burning furnace, and they have measured the particulate level in their home when their neighbor burns wood. It can reach dangerous levels. Converse said it's not just his house. The entire neighborhood is being overridden with smoke from the furnace. "Everybody," Converse said. "It's 24-7."

The neighbor who owns the wood furnace, Joe Tassitano, said the complaints won't deter him from using his furnace. "I have nothing to say," Tassitano said. "I love wood boilers."

The EPA's new regulations would require increased efficiency. At the end of five years, the EPA has said, the wood stoves and furnaces on the market will be 80 percent cleaner than those sold today. These new stoves will burn wood much more efficiently. Those who own them will spend less on wood, saving money on fuel. They'll also reduce the health costs caused by breathing smoky air.

In all, the EPA has said, the new standards will create a $1.8 billion to $2.4 billion a year in economic benefit in the United States. Unmoved, Luff estimates thousands of wood boilers are running in Connecticut alone -- he had sold 2,500 himself -- and the vast majority of them operate without complaint. He is quick to point out that photos in the paper of smoking flues are usually taken when the unit is cold.

"Once it's up to temperature, you see nothing," Luff said. "That's called gasification burn."

Burning wood, Luff says, is better for the environment because it's not a fossil fuel. Burning wood has a "zero carbon footprint" because the carbon dioxide generated by the burning wood is offset by the trees that are growing to replace the firewood.

Luff said the people who burn wood are no match for the clean-air lobby, which they view as wrong-headed when it comes to wood.

"If you have 4 1/2 acres, you'll have an endless supply of fuel," he said. "You'll never diminish your supply of trees."