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Date: 2024-03-03 Page is: DBtxt001.php txt00016990

Thought Leadership

KENNETH ROGOFF ... The Case for a World Carbon Bank

I became interested in science as a schoolboy 60 years ago. The reality of climate change has been observed for many decades, but ignored by business and political leadership or worse, used in ways that increased profit performance, no matter what the collateral damage. In my view the Green New Deal is way better than a Green No Deal, and would be even better if it became a model for the world and not just the USA and especially if combined with an appropriately designed international development bank that enables the essential operating and investment liquidity to restructure the socio-enviro-economic system into a system that is truly sustainable.
Peter Burgess
rogoff182_GettyImages_pollutedearthillustrationGetty Images The Case for a World Carbon Bank

To the dismay of many energy experts, the World Bank recently rather capriciously decided to stop funding virtually all new fossil-fuel plants. But phasing out readily available coal is a move that most major developing countries simply cannot afford without adequate incentives.

CAMBRIDGE – Although much derided by climate-change deniers, not least US President Donald Trump, Alexandria Ocasio-Cortez’s Green New Deal hits the nail on the head with its urgent call for the United States to lead by example on global warming. But the sad truth is that, for all the needless waste produced by American’s gluttonous culture, emerging Asia is by far the main driver of the world’s growing carbon dioxide emissions. No amount of handwringing will solve the problem. The way to do that is to establish the right incentives for countries such as China, India, Vietnam, Indonesia, and Bangladesh.

It is hard to see how to do this within the framework of existing multilateral aid institutions, which have limited expertise on climate issues and are pulled in different directions by their various constituencies. For example, to the dismay of many energy experts, the World Bank recently rather capriciously decided to stop funding virtually all new fossil-fuel plants, including natural gas. But replacing dirty coal plants with relatively clean natural gas is how the US has managed to reduce emissions growth dramatically over the past decade (despite Trump’s best efforts), and is a centerpiece of the famous “Princeton wedges” pragmatic options for minimizing climate risk. One cannot let the perfect become the enemy of good in the transition to a carbon-neutral future.

It is high time to create a new, focused agency, a World Carbon Bank, that provides a vehicle for advanced economies to coordinate aid and technical transfer, and that is not simultaneously trying to solve every other development problem. Yes, I fully understand that the current US administration is reluctant to fund even existing international institutions. But the West cannot retreat from a world of intertwined climate responsibilities.

According to the International Energy Agency – one of the few honest brokers in the global climate-change debate and a model on which a new World Carbon Bank research department could build – annual CO2 emissions in Asia are now double that of the America’s, and triple that of Europe. In advanced economies, where the average age of coal plants is 42 years, many are reaching the natural end of their lifespan, and it is not a great burden to phase them out. But in Asia, where one new coal plant a week is being built, the average age is only 11 years, and most will be running for decades to come.

Coal accounts for over 60% of electricity generation in rapidly growing China and India. Even though both countries are investing heavily in renewables such as solar and wind power, their energy needs are simply growing too fast to cast aside widely available coal.1

How can the US arrogantly tell India to cut back on CO2 emissions that are only one-tenth those of the US? For that matter, how can the US persuade Brazilian President Jair Bolsonaro’s government to cut back on Amazon deforestation (rainforests are nature’s carbon sink) and development without providing some concrete incentives?

There are many options for trying to reduce carbon emissions. Most economists (including me) favors a global carbon tax, though some argue that the more politically digestible cap-and-trade formula can be virtually as effective. But this is pie in the sky for developing-country governments desperate to meet their people’s basic energy needs. In Africa, only 43% of people have access to electricity, versus 87% worldwide.

Ignorant presidents aside, most serious researchers see the risk of catastrophic climate change as perhaps the greatest existential threat facing the world in the twenty-first century. The effects are already with us, whether record heat on the US West Coast and in Europe, epic flooding in Iowa, or the impact of climate risks on the price of home insurance, which is rising beyond the reach of many people. And today’s refugee problem is nothing compared to what the world faces as equatorial regions become too hot and too arid to sustain agriculture, and as the number of climate migrants explodes to perhaps a billion or more by the end of the century.

The US military is readying itself for the threat. Back in 2013, the chief of the US Pacific forces, admiral Samuel J. Locklear, listed long-term climate change as the biggest national-security threat. Given grave doubts about whether existing measures, such as the 2015 Paris climate agreement, are likely to do more than slightly slow down global warming, pragmatists are right to see preparing for the worst as a grim necessity.

Advanced economies need to put their own environmental house in order. But it will not be nearly enough if developing Asia, and perhaps someday developing Africa, are not also placed on a different development track. A new World Carbon Bank is almost surely a necessary piece of any comprehensive solution, even given the miraculous technological developments everyone is hoping for.

How much it will cost depends on assumptions and ambitions, but one can easily imagine a trillion dollars over ten years. Crazy? Maybe not, compared to the alternatives. Even a Green New Deal is better than a Green No Deal.

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Kenneth Rogoff KENNETH ROGOFF Writing for PS since 2002 182 Commentaries Follow
Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. The co-author of This Time is Different: Eight Centuries of Financial Folly, his new book, The Curse of Cash, was released in August 2016.
7 Comments on this article
RIK RIJS Jul 14, 2019 It's not just greenhouse gasses that influence climate. Deforestation, especially in Latin and South Alerica, Asia and Africa, ... Population explosion causing desertification on a wide scale in Africa, ... Limiting the climate change elements to greenhouse gasses is foolish. May 2019 was the worst month in history for the Brazilian forests. Never did the Brazilians cut more trees. Read less Reply
VINCENT LAFFORGUE Jul 11, 2019 Both basic research and RD&D for clean energy are necessary to avoid disaster. Basic research is badly underfunded. Global public spending in clean energy RD&D (including nuclear energy, carbon capture and energy efficiency) is of the order of 0,02% of global GDP, or 1% of global military expenditures. Global corporate spending in clean energy RD&D (including nuclear energy and carbon capture but not energy efficiency or the automotive industry) is even lower, of the order of 0,01% of global GDP. Official sources from IEA (International Energy Agency) are There was also a report by British economists supported by David Attenborough Read less Reply
RIK RIJS Jul 14, 2019 Do you think that the US supported dictators will stop pumping oil and gas? Imagine fossil fuel prices dropping because of renewables, those dictators will pump up even more and poor countries will buy it to develop their economies. It's called substitution and common in commodities markets. Read less Reply
PIERRE.ELIAS Jul 10, 2019 WCB? Why not. Knowledge transfer to, from and for. Innovation from Papua New Guinea Reply
PIERRE.ELIAS Jul 10, 2019 WCB, why not! Knowledge transfer to, from and for. See some innovation out of Papua New Guinea Reply
JACKI RAWN Jul 9, 2019 Show paragraph This is logically risky. It is a deduction from the results to the reason. Given the existing assets are still hugely under-utilised, and still curtailment for wind/solar PV exists, this argument would not hold and imply there still need new coal. Reply
PETEY BEE Jul 8, 2019 That's right. The US is still one of the world's leaders in both energy availability and carbon emissions on a per capita basis, and we have a number of incentive programs for energy production and conversion that are counterproductive in terms of climate change (e.g subsidies for corn ethanol, unconventional oil/gas, single occupancy vehicle transport, detached housing [heat/AC]). These programs help maintain our leadership in per capita energy availability, but do so in the cheapest and most carbon intense way. Targeting climate change does not need to rest entirely on new subsidies. We should instead redirect existing subsidies to more beneficial use. Without reversing the high carbon lifestyle at home, it would not be persuasive to request that developing countries take a more costly but lower carbon development path.
Jul 8, 2019
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