by Óscar Granados
Michael Greenstone, Milton Friedman distinguished professor of economics at the University of Chicago, has one figure always in mind: 85% of the projected pollutant emissions for the rest of the century will come from outside of the EU and the USA. So, the fight against global warming is in the developing countries, where there is little incentive to adopt renewable energy sources.
“I call this the cruel arithmetic of climate change,” he explains. “The places that are generally the poorest are also the most likely to suffer the greatest climate damage. They are in the spotlight, and they are being asked to allocate resources that could be used to buy food or drinking water to reduce their emissions,” he says.
Greenstone (Chicago, USA, 56 years old) proposes a radical change in global climate policy: from a significant increase in R&D investment by the G-20 countries, to lower the costs of low-carbon technologies compared to fossil fuels, to a transformation of international negotiations that are currently a source of tension rather than a solution between developed and developing countries.
This researcher’s proposal is for the richest countries to pay the most vulnerable for the damage caused by their emissions. The transfers would be conditional on the recipients imposing a carbon tax.
“It would work as a real incentive to move towards effective global decarbonization,” Greenstone points out before the conference he gave a few weeks ago at the Ramón Areces Foundation and the Navarra Center for International Development (University of Navarra).
Greenstone says that if the prices of fossil fuels reflected their true cost to society, they would be much higher than they are today. Years ago — during the early years of the Barack Obama administration, together with another economist, Cass Sunstein—he developed a model that put a figure on the economic damage caused by each additional ton of CO2 emitted into the atmosphere. At that time, it was about $43. Today, it reaches $170 in the world’s leading economy, where one person is responsible for around 15,000 tons of CO2 per year. Beyond the volume, what is striking about this figure is that about $167 directly affects countries outside the OECD. “These are regions in the global south with lower energy consumption, lower incomes and, paradoxically, less historical responsibility for the climate crisis,” he says.
According to Greenstone’s model, who also heads the Institute for Climate and Sustainable Growth (which he founded) and the Energy Policy Institute at the University of Chicago, the greatest damage per capita from climate change will be concentrated, between now and the end of the century, in those most vulnerable countries. “The arithmetic of climate change is ruthless,” he emphasizes.
Question: What can we do?
Answer: I think it’s very important that rich countries find ways to reduce their polluting gases. But even more important is to create the conditions for emerging economies to see that it is in their own interest to reduce their carbon emissions.
Q: What would be a good deal?
A: First, I think the G-20 countries should commit to investing more in R&D in low-carbon technologies, until they are cheaper than fossil fuels. Second, global climate negotiations [the COP] need to change their model, because the current one is not working. Emerging economies, which are on the front line of climate damage, are upset because they want to grow and need fossil fuels. They are not very excited about being told: it’s time to reduce your polluting gases.
Q: Is there a solution to this problem?
A: My proposal is that developed countries compensate developing countries for the damage their emissions are causing them. The idea is to calculate the volume of greenhouse gas emissions and multiply it by the estimated economic of the environmental damage they cause. For example, if it is estimated that one ton of CO2 generates $50 in losses for India, then emitting countries should pay that amount for each ton that affects that country. However, there is one condition: India (or any recipient country) could only access that money if it applies a national carbon tax.
Q: Is this agreement viable if Donald Trump insists on fossil fuels?
A: Yes, because global consensus is not necessary for it to work. Each country can join on a voluntary basis. This fund would only Each country can join voluntarily. This fund would only be distributed among recipient countries that have implemented a carbon tax. This encourages a coalition of rich countries committed to climate action, which offer concrete incentives.
Q: Is Trump a threat to curbing global warming?
A: Human beings are not on the planet to minimize climate change, but to maximize human well-being. Energy prices determine our well-being. More expensive energy means less money to spend on other things. And the Trump administration takes an extreme position: the only thing that matters is energy prices. But the data shows that this is a misreading. And, unfortunately, I am quite sure that climate disasters will continue to occur, such as the fires in Los Angeles, which contradict that view. Trump’s policy lacks empirical support.
Q: What is Europe’s position?
A: I think there is an opportunity to replace some costly regulations with more efficient tools to reduce
carbon emissions. When I say replace, I mean relying more fully on the market, such as the emissions trading system. There is an opportunity there.
Q: And how do you see Spain?
A: Spain has been a country that has firmly embraced renewables, and it is closely linked to the European project in general. Europe and Spain have really been an example to the world.
Q: During the blackout in Spain, the political debate focused on renewables. Some questioned their reliability.
A: We are all learning how to integrate renewables into the grid. Their big challenge is intermittency: the sun and wind are not always available, so they need reliable and cheap backup. As an economist, I don’t know which technology will win, but we must do two things: put a price on carbon and invest in early innovation, even without knowing what results it will bring.
This post was translated into English. Original post on El País