February 19, 2020
Degrowth isn't enough to stem climate change
Whether or not carbon-neutrality by 2050 is sufficient to prevent catastrophic climate change, the idea constitutes the current consensus about what is technically and politically feasible. But as Martin Wolf argues in his latest FT column, the economic system will not achieve this transition left to itself. It will require regulation, incentives and government funding for research and development.
One important observation Wolf makes is that global impoverishment will not solve the problem of decarbonisation. Emissions per unit output have been declining in the period of 1990-2018 at about 2% per year. But, even with stagnant global GDP, emissions would only fall to 60% of their current level by 2050. Low-carbon technologies are more advanced, not less. We would add that the eurozone itself is the best example that de-growth does not improve the environment. As austerity hit Greece and GDP dropped by 25% between 2007 and 2014, air quality worsened. People reverted to burning scrap wood for heating rather than pay for gas or electricity. The answer to the climate crisis is not squalor, but investment and therefore continued GDP growth.
The radical transformation of the world's energy system will also require global cooperation as two thirds of carbon emissions come from developing or emerging economies. Some major developed countries, such as the US under Donald Trump are not on board with the 2050 target. We at Eurointelligence also have our misgivings about the European commitment, notably Germany's attachment to the carbon economy and the way the fiscal targets frustrate investment.
In any case, climate transition investment is not taking place at the necessary pace. One can see this by taking the growth of the green bond market as a gauge of actually occurring real investment in climate adaptation. The latest data from the climate bonds initiative is that, despite strong growth in 2019 after stagnation in 2018, global green bond issuance was $250bn. This should be compared with estimates of €2tn a year for the additional investment that would be necessary to meet the Paris climate targets. The EU is doing better but still not enough. Green bond issuance was just over €100bn in 2019, compared with investment needs that the European Commission estimates at between €180bn and €300bn a year.
source: Climate Bonds Initiative