Is Climate Change Mitigation Compatible with Economic Growth?

This week marks Green Great Britain Week, an initiative outlined in the Clean Growth Strategy which seeks to promote and highlight the opportunities clean growth offers the UK and raise understanding of how business and the public can contribute to tackling climate change.

The week celebrated the fact that the “UK has led the world to date in cutting emissions while creating wealth. Between 1990 and 2016, the UK reduced its emissions by over 40% while growing the economy by more than two-thirds – the best performance in the G7 on a per person basis.”

Whilst reflecting on the progress that has been made and the UK’s leadership on climate change, it is worth considering how the lofty ambitions of clean growth can be actualised.

In light of last week’s UN IPCC report, which revealed that every extra bit of warming matters, especially since warming of 1.5ºC or higher increases the risk associated with long-lasting or irreversible changes, such as the loss of entire ecosystems, it is clear more decisive action is required.

Critics of more targeted environmental action perceive it to be too interventionist, a means to control and, to an extent, undermine businesses – the antithesis of the laissez faire approach that many countries have adopted in recent years. Whilst some opposed to climate action have argued that green growth is not possible as environmental protection goes against modern economic interests, others go so far as to argue that the current economic base of society is incompatible with environmentalism and call for a radical overhaul of the status quo if we are to quell the threat posed by climate change. This contention leads me to ponder, is climate change mitigation compatible with economic growth? Can we, the UK, balance the interests of business with the pressing need for decarbonisation and emission reduction? Does climate change action actually offer new, divergent business opportunities, something investors should be capitalising on?

Decoupling economic growth from energy consumption is not easy and the marrying of environmental and economic imperatives in policy is not commonplace, but there are ways in which green, clean growth can be achieved:

Breaking free from the use of fossil fuels

Governments should invest heavily in new infrastructure that is not fossil fuel dependent (such as heating systems that do not utilise high carbon fossil fuels and electric transport). This should be coupled with divestment in fossil fuels and investment in what can more broadly be described as green technologies.

Taxing high carbon goods and services

Adding a carbon tax onto pollution practices – this taxation should be hypothecated and used on ‘green’ infrastructural projects. Alongside this, carbon metrics and cap and trade systems should continue to be utilised.  Whilst the future of the UK’s role in the EU ETS is uncertain, this measure remains important and country can, and should, develop their own comparable schemes.

Ensuring innovation subsidies or any other subsidies are weighted to support low carbon technologies.

Even where policies aren’t focused on carbon emissions reduction (such as the latest round of the UK’s Energy Company Obligation), priority should be given to lower or zero emitting technologies.

Stimulating green economic activities

Through investment and competitions and encouraging the growth of clean tech (defined as technologies, processes or services which protect and conserve resources.)

Tackling industrial pollution

This involves regulating vis a vis inspection and punishment and improving corporate governance. Much awareness of the impacts of polluting on a personal, micro level has been raised in recent years. As a result of this, we are starting to see significant individual behavioural change – we need to see the same at a Multi-National Corporation level now.

Despite the naysayers, I remain optimistic that green growth can be achieved. This year’s Nobel Economics Prize was awarded to Willian Nordhaus and Paul Romer, two US Economists for their work on constructing green growth models – shedding light on the fact that environmental policies need not be the enemy of economic growth; we can see our economy grow and diversify whilst heading down a greener trajectory.

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