As a social issue, global warming is exactly that: global. It’s not as simple as investing in cleaner energy sources in any one country. Energy is critical to growth, and because fossil fuels are abundant, they are broadly utilized to sustain the growth of world economies. The problem, Michael Greenstone argued in his Friedman Forum talk on the Global Climate Challenge, is that the economic incentives to utilize those fossil fuels are stronger than the incentives to use alternatives that don’t contribute carbon dioxide gases to the atmosphere.
Daunting as it may seem, Greenstone deconstructed the global policy challenge of climate change in economic terms, highlighting the ways that current policy prescriptions might come up short and suggesting alternative approaches that leverage the elemental forces of economic theory.
Greenstone explained that access to energy is critical to growing a country’s economy, but much of the world has trouble gaining access to energy and has to import it as cheaply as possible. Fossil fuels are cheap, and thus satisfy this demand in spades: they make up 86 percent of the world’s energy mix. Technological innovation in extracting fossil fuels—notably fracking—has outpaced innovation in renewable energy, only widening this gap. “It’s as though a five- to ten-year supply of natural gas fell out of the sky,” said Greenstone.
The story is similar when it comes to transportation. To provide the incentive for electric cars to overtake gas-powered models, oil would need to cost $470 per barrel by 2020, explained Greenstone. It currently sits at about a tenth of that…
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