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Paul Krugman | Saving the Planet Won’t Kill the Economy

What we actually need is a change in the form of growth – and that’s exactly the kind of thing markets are good at, if you get the prices right.

Nate Silver got a lot of grief when he chose Roger Pielke Jr., of all people, to write about the environment for his new web site, FiveThirtyEight. Mr. Pielke, a professor at the University of Colorado, is regarded among climate scientists as a concern troll – someone who pretends to be open-minded, but is actually committed to undermining the case for emissions limits any way he can.

But is this fair?

Well, I’m happy to report that Mr. Pielke recently wrote a letter to the editor of the Financial Times about the economics of emissions caps – something I know a fair bit about – that abundantly confirms his bad reputation. Better still, the letter offered a teachable moment, a chance to explain why claims that we can’t limit emissions without destroying economic growth are nonsense.

According to Mr. Pielke: “Carbon emissions are the product of growth in gross domestic product and of the technologies of energy consumption and production. More precisely, this relationship is called the Kaya Identity – after Yoichi Kaya, the Japanese scientist who first proposed it in the 1980s. Thus, by definition, a ‘carbon cap’ necessarily means that a government is committing to either a cessation of economic growth or to the systematic advancement of technological innovation in energy systems on a predictable schedule, such that economic growth is not constrained. Because halting economic growth is not an option, in China or anywhere else, and because technological innovation does not occur via fiat, there is in practice no such thing as a carbon cap.”

This is actually kind of wonderful, in a bang-your-head-on-the-table sort of way. Mr. Pielke isn’t claiming that it’s hard in practice to limit emissions without halting economic growth – he’s arguing that it’s logically impossible. So let’s talk about why this is stupid.

Yes, emissions reflect the size of the economy and the technologies available. But they also reflect choices – choices about what to consume and how to produce it; choices about which of a number of energy technologies to use. These choices are, in turn, strongly affected by incentives: change the incentives and you can greatly change the quantity of emissions associated with a given amount of real G.D.P.

Take, as an example we’re all familiar with, auto emissions. In a wealthy economy, people will want to move around. But some of them might use public transit if the price and quality were right; people could drive fuel-efficient cars rather than big sport-utility vehicles; they could use diesel, or drive hybrid vehicles. All these choices would impose some costs, and reduce real income to some extent – but the effect wouldn’t even remotely be that real G.D.P. would fall one-for-one with emissions.

As it happens, by the way, the Obama administration’s tightening of fuel economy standards is by some measures as important a move as its recent power-plant regulations. Still, the power-plant policy is what’s in the news and what motivates Mr. Pielke’s letter. Where are the choices there?

The answer is, everywhere. Electricity consumption isn’t in a fixed relationship with G.D.P.: there are many choices to be made on things like insulation and building design. Even more important, there are many ways to generate electricity: coal, gas, nuclear, hydropower, wind, solar – and the alternatives to coal are more competitive than ever before. That doesn’t mean that reducing emissions has no cost, but again, the idea that, say, a 30 percent fall in emissions requires a 30 percent fall in G.D.P. is ludicrous.

Let me add, by the way, that Mr. Pielke’s fallacy – the notion that there’s a rigid link between growth and pollution – is shared by some people on the left, who believe that saving the planet means that economic growth must end. What we actually need is a change in the form of growth – and that’s exactly the kind of thing markets are good at, if you get the prices right.

Anyway, I guess I should thank Mr. Pielke for his intervention, which has helped to clarify how we should think both about energy issues and about him.

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