Global downturn and climate change (and e-mails)

As I recall, in the mid to late 80’s there was a lot of discussion and passion about sustainability (at least in the UK). Then, at the end of the 90’s we had a recession, and interest moved away from the long term focus of the green agenda, and towards the much shorter term pains. It took many many years for the sustainability agenda to re-emerge as global warming concerns, though the evidence accumulated steadily all the time. In the last few years, global warming has become a big topic again, with even the apologists in the US getting on board. But, over the last few months we have had a large economic shock, the US is in recession, and other countries may follow suit. So, I was musing on what this might do to the global warming agenda.

99 -> 82

My initial thought, for a second or two, was that this was a bad thing. But, a little more musing, and I find myself much more uncertain, though its probably unhelpful. But, that there are things that we should do to make the best of the opportunity.

Why might climate change agenda be damaged?

By far the most important reason in my mind is that it requires trade-offs that cost money today, even though they clearly earn in the long term. This requires real political leadership, and that becomes much much harder when the electorate is hurting, and has a chance to vote you out every few years. This is amplified when the politics becomes, well, political (by which I mean pandering to popular opinion, not logic). As an example, the US election candidates all seem to talk about stopping production going overseas, and I’ve heard them use different pollution standards as one of the reasons. That seems very silly, since the standards may be lower per-se, but the cost of production is much higher, with most of it going on high-cost labour who use that high cost up in the most polluting average lifestyle on the planet. Growing biofuel crops in the US is another ludicrous example (see previous post here).

82 -> 61

Another reason is that many of the changes required to reduce carbon load are capital intensive, vs. existing facilities already in use – e.g. wind farms, solar farms, carbon sequistration, clean chemical production. The drop in global liquidity makes capital much more expensive for the same level of risk, but also drops confidence in demand downstream, so increases the risk on the capital. I fear that the double whammy might really hurt some of these investments.

Uncertain elements

Recently, commodity prices have been very high, even when you allow for the depreciation of the dollar (in which many, such as oil, are priced). This has been driven mainly by massive step-change increase in demand in China and other areas, which the supply side hasn’t caught up with. This is making people think harder about things like fuel efficiency in the US, and we do see a drop in ‘light truck’ sales which is very welcome (e.g. here). This should be good news for the environment, when taken with a downturn overall.

But, people can be very sticky (e.g. see here), especially when the entire infrastructure has grown up around the existing model – for example the strip malls in the US that require you to drive, and for relatively long distances. And, they may defer personal capital expenditure, just like the point above. So, in the short term, I suspect that the high commodity prices just mean that money is re-distributed, not reduced, and it is likely to get spent wherever it is redistributed to. And, I can’t see domestic demand in China reducing any time soon. So, I am left uncertain about whether the high commodity prices that we have as a result of the recent boom will help or hinder the environmental agenda in the short term.

61 -> 41

How might the agenda be helped?

The key area of aid is lower demand, as an obvious result of a slow-down in the economies across the world. For example, in the UK and US we’ve had a glut of house building in the last few years. But, people are now freezing building projects, which will directly reduce immediate demand for things like cement (which is basically bagged energy use, with 5% of all global emissions associated with cement production). This should be unequivocal good news, but I do wonder whether it just defers that much of the environmental load for a few years, and that makes little difference across the timescales that matter on global warming. For example, the UK flat building boom is supported by the increase in single-person households, with little evidence of a volume overhang (pricing is silly, but that is a different matter). I guess it does avoid building more capacity though, which feels a good thing.

41-> 18

What can be done to leverage the opportunity?

Whether it is a good thing or not is somewhat of a moot point. It will be what it is. But, it does feel like there are things that can be done that would help leverage the opportunity :-

  • Don’t push to agree new carbon emissions cap mechanisms now – they are too likely to get tied up in other politics. Or, go through any proposals with a toothcomb for bias and make them very public
  • Use the desire to support the economy through paying bounties on removal of some of the worst polluting practices – e.g. older inefficient cars. Makes use of support that would otherwise be less focussed. Another example would be in tightening building standards whilst there is a relative pause in production.
  • Ensure that the impact remains in peoples minds, but do the analysis to link it to the economic situation (i.e. answer the question I can’t answer above). That might help people understand that the rate of production in recent years really isn’t likely to be sustainable, so they should be looking to come out of a downturn at a lower rate of production, not look for a feel-good bounce-back.

18 -> zero

Oh, and the numbers through the post? They are the number of e-mails left in my work e-mail inbox (trivia had already gone, sadly, so these were ones that needed work). I make a point of not working at the weekend if I have any choice … but sometimes there is so much to do backed up that I have no choice. But, I thought I’d intermingle writing this post and the e-mail to keep my attention up!

Caveat emptor – I have checked some, but far from all facts in this post. If I did that I wouldn’t have got my e-mail/anything else done as well. And, flicking between work e-mails and this post means I kept having to remind myself where I had got to, the argument may well have flaws. If you see something that looks wrong then leave a comment and I’ll check.

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