Advancing a Viable Global Climate Stabilization Project: Degrowth versus the Green New Deal

Introduction

I appreciate the invitation to explore, in this forum, two dramatically divergent approaches to advancing a viable and just project for global climate stabilization. The first approach, which I strongly advocate, is grounded in extensive research by myself, co-authors, and others, and is what I variously call “Egalitarian Green Growth,” or a “Green New Deal.” ¹

The second approach has been termed “Degrowth” by its proponents. Versions of this approach are developed, for example, in work by Peter Victor (2008), Tim Jackson (2009, 2017), Juliet Schor (2010), and the 2015 collection edited by D’Alisa, Demaria, and Kallis, Degrowth: A Vocabulary for a New Era (and including brief essays by, among others, Victor, Jackson, and Schor). As expressed by D’Alisa, Demaria, and Kallis, “The foundational theses of degrowth are that growth is uneconomic and unjust, that it is ecologically unsustainable and that it will never be enough” (2015: 6). As is evident from the 51 distinctly-themed chapters in the D’Alisa, Demaria, and Kallis collection, degrowth addresses a much broader range of questions than climate change alone. In fact, a major problem with the degrowth literature is that, in concerning itself primarily with very broad themes, it actually gives almost no detailed attention to developing an effective climate-stabilization program.

Let us dispose of some red herrings at the outset. First, I share virtually all the values and concerns of degrowth proponents. I agree with them that economic growth, in general, produces a wide range of negative environmental effects. I also agree that a significant share of what is produced and consumed in the current global capitalist economy is wasteful, especially much, if not most, of what high-income people throughout the world consume. It is also obvious that economic growth per se makes no reference to the distribution of the benefits of growth and, more generally, offers no critique of capitalism as a mode of production. As for GDP as a measure of economic growth, there is no disputing that it fails to account for the production of environmental “bads” as well as consumer goods. GDP also does not account for unpaid labor, most of which is performed by women. GDP per capita also tells us nothing about the distribution of income or wealth.

Focusing on climate change specifically, we actually need some categories of economic activity to grow massively—those associated with the production and distribution of clean energy. Concurrently, the global fossil-fuel industry needs to contract massively—i.e., to “degrow” steadily and dramatically until it has almost completely shut down within the next 40–50 years. In my view, addressing these matters in terms of their specifics is much more constructive than presenting broad generalities about the nature of economic growth, positive or negative. I develop these points in what follows.

The Severity of the Climate Crisis and Absolute Decoupling

To make real progress on climate stabilization, the single most critical project at hand is straightforward: to cut the consumption of oil, coal, and natural gas dramatically and without delay. The reason this is the single most critical issue at hand is that producing and consuming energy from these fossil-fuel sources is responsible for generating about 70 percent of the greenhouse gas emissions that are causing climate change. Carbon dioxide (CO₂) emissions from burning coal, oil, and natural gas alone produce about 66 percent of all greenhouse gas emissions, while another 2 percent is caused mainly by methane leakages during extraction.

As of the most recent worldwide data from the International Energy Agency (IEA), global CO₂ emissions were at around 32 billion tons in 2015. The Intergovernmental Panel on Climate Change (IPCC) provides conservative benchmarks as to what is required to stabilize the average global temperature at no more than 2° Celsius (3.6° Fahrenheit) above the pre-industrial average. The IPCC presents these benchmarks in terms of ranges and probabilities, but a fair summary of their two most recent assessments—i.e., their Fourth and Fifth Assessment Reports, published in 2007 and 2014, respectively—is that global CO₂ emissions need to fall by about 40 percent within 20 years, to 20 billion tons per year, and by 80 percent as of 2050, to seven billion tons. The global economy is not close to being on track to meet these goals. Overall global emissions rose by 43 percent between 2000 and 2015, from 23 billion tons to 32 billion as economies throughout the world continued to burn increasing amounts of oil, coal, and natural gas to produce energy. According to the 2017 forecast by the IEA, if current global policies remain on a steady trajectory through 2040, global CO₂ emissions instead rise to 43 billion tons. If this is the actual situation in 2040, then there will be virtually no chance to bring global emissions down to seven billion tons, or any figure close to that, by 2050. ²

People do still need to consume energy to light, heat, and cool buildings, to power cars, buses, trains, and airplanes, and to operate computers and industrial machinery, among other uses. As such, to make progress toward climate stabilization requires a viable alternative to the existing fossil-fuel-dominant infrastructure for meeting the world’s energy needs. Energy consumption and economic activity, more generally, therefore need to be absolutely decoupled from the consumption of fossil fuels. That is, the consumption of fossil fuels will need to fall steadily and dramatically, even while people will still be able to consume energy resources to meet their various demands. Economies can still continue to grow—and even grow rapidly, as in China and India—while still advancing a viable climate-stabilization project, as long as the growth process is decoupled from fossil-fuel consumption. This is what we can accomplish through the Green New Deal.

The Basics of the Green New Deal

Here is the core premise of the Green New Deal: a worldwide program whose central aim is to invest 1.5–2 percent of global GDP per year in raising energy-efficiency standards and expanding clean renewable energy supply could realistically bring global CO₂ emissions down by 40 percent relative to today within 20 years, while also supporting rising living standards and expanding job opportunities. CO₂ emissions could be eliminated altogether in 40–50 years through continuing this clean-energy investment project at roughly the same rate of about 1.5–2 percent of global GDP per year. Within this framework, more rapid economic growth will, therefore, also entail more rapid investments that accelerate the clean energy transition.

For 2016, the global clean-energy investments level was about $300 billion, 0.4 percent of global GDP. Thus, the increase in clean-energy investments will need to be in the range of 1–1.5 percent of global GDP—that is, about $1 trillion at the current global GDP level of about $80 trillion. It needs then to rise in step with global GDP growth thereafter—to achieve a 40 percent emissions reduction within 20 years. The consumption of oil, coal, and natural gas will also need to fall by about 35 percent over this same twenty-year period—an average rate of decline of 2.2 percent per year. Pursuing this same basic investment pattern beyond the initial 20-year investment program, along with the continued contraction of fossil-fuel consumption, is how the global economy could realistically achieve a zero-emissions standard within roughly the next 50 years.

Of course, both the privately owned fossil-fuel companies, such as Exxon-Mobil and Chevron, and equally, the publicly owned companies such as Saudi Aramco and Gazprom in Russia, have massive self-interests at stake in preventing reductions in fossil-fuel consumption, as well as holding enormous political power. These powerful vested interests will simply have to be defeated.

The investments aimed at dramatically raising energy-efficiency standards and expanding the supply of clean renewable energy will also generate tens of millions of new jobs in all regions of the world. This is because, in general, building a green economy entails more labor-intensive activities than maintaining the world’s current fossil-fuel-based energy infrastructure. At the same time, unavoidably, workers and communities whose livelihoods depend on the fossil-fuel industry will lose out in the clean-energy transition. Unless strong policies are advanced to support these workers, they will face layoffs, falling incomes, and declining public-sector budgets to support schools, health clinics, and public safety. It follows that the global green-growth project must commit to providing generous transitional support for workers and communities tied to the fossil-fuel industry.

What is Clean Energy?

There are large differences in the emissions levels resulting through burning oil, coal, and natural gas, with natural gas generating about 40 percent fewer emissions for a given amount of energy produced than coal and 15 percent less than oil. It is, therefore, widely argued that natural gas can be a “bridge fuel” to a clean-energy future, through switching from coal to natural gas, to produce electricity. But such claims do not withstand scrutiny. At best, an implausibly large 50 percent global fuel switch to natural gas would reduce emissions by only 8 percent. But even this calculation does not take account of the leakage of methane gas into the atmosphere that results from extracting natural gas through fracking. Recent research finds that when more than about 5 percent of the gas extracted leaks into the atmosphere through fracking, the impact eliminates any environmental benefit from burning natural gas relative to coal. Recent studies have reported a wide range of estimates as to what leakage rates have actually been in the United States, as fracking operations have grown rapidly. A recent survey paper puts that range as 0.18 to 11.7 percent for different specific sites in North Dakota, Utah, Colorado, Louisiana, Texas, Arkansas, and Pennsylvania. But it would be reasonable to assume that if fracking expands on a large scale in regions outside the United States, it is likely that leakage rates will fall closer to the higher-end figure of 12 percent, at least until serious controls can be established. This, then, would diminish, if not eliminate altogether, any emission-reduction benefits from a coal-to-natural-gas fuel switch.

Some analysts also consider “clean energy” to include nuclear power, and carbon capture and sequestration (CCS) technologies. Nuclear power does generate electricity without producing CO₂ emissions. But it also creates major environmental and public safety concerns, which have only intensified since the March 2011 meltdown at the Fukushima Daiichi power plant in Japan. Similarly, CCS presents hazards. These technologies aim to capture emitted carbon and transport it, usually through pipelines, to subsurface geological formations, where it can be stored permanently. But such technologies have not been proven at a commercial scale. The dangers of carbon leakages from flawed transportation and storage systems will, in any case, only increase to the extent that CCS technologies are commercialized. As such, the most cautious clean-energy transition program requires investments in technologies that are well-studied, already improving rapidly, and will not pose significant public safety and environmental problems.

The first critical project within the global green-growth project is to dramatically raise energy-efficiency levels. Energy efficiency entails using less energy to achieve the same, or even higher levels of energy services from the adoption of improved technologies and practices. Examples include insulating buildings much more effectively to stabilize indoor temperatures; driving more fuel-efficient cars or, better yet, relying increasingly on well-functioning public transportation systems; and reducing the amount of energy that is wasted both through generating and transmitting electricity, and through operating industrial machinery.

Expanding energy-efficiency investments support rising living standards because raising energy efficiency standards, by definition, saves money for energy consumers. ³ A major 2010 study by the US Academy of Sciences found, for the US economy, that, “energy efficient technologies… exist today, or are expected to be developed in the normal course of business, that could potentially save 30 percent of the energy used in the US economy while also saving money” (NAS, NAE, and NRC 2010: 4). Similarly, a McKinsey and Company study focused on developing countries found that, using existing technologies only, energy-efficiency investments could generate savings in energy costs in the region of 10 percent of total GDP, for all low and middle-income countries (McKinsey & Company 2010). In her 2015 book, Energy Revolution, Mara Prentiss argues, further, that such estimates understate the realistic savings potential of energy-efficiency investments.

As for renewable energy, the International Renewable Energy Agency (IRENA) estimated in 2018 that, in all regions of the world, average costs of generating electricity with most clean, renewable energy sources—wind, hydro, geothermal, and low-emissions bioenergy—are now roughly at parity with fossil fuels (IRENA 2018). This is without even factoring in the environmental costs of burning oil, coal, and natural gas, whose costs would, of course, rise through a carbon tax or cap. Solar-energy costs remain somewhat higher on average. But, according to IRENA (2018), as a global weighted average, solar-photovoltaic costs fell by over 70 percent between 2010 and 2017. Solar-photovoltaic costs are likely to also reach full cost parity with fossil fuels as an electricity source within five years. Adnan Z. Amin, director-general of IRENA summarizes the global cost trajectory as follows: “By 2020, all mainstream renewable power generation technologies can be expected to provide average costs at the lower end of the fossil-fuel cost range. In addition, several solar PV and wind-power projects will provide some of the lowest-cost electricity from any source” (IRENA 2018: 5). ⁴

Job Creation and the Just Transition

Countries at all levels of development will also experience significant gains in job creation, through clean-energy investments relative to maintaining their existing fossil-fuel infrastructure. Research that I have conducted with co-authors has found this relationship to hold in Brazil, China, Germany, India, Indonesia, Puerto Rico, South Africa, South Korea, Spain, and the United States. For a given level of spending, the percentage increases in job creation range from about 75 percent in Brazil to 350 percent in Indonesia. With India, as a specific example, we found that increasing clean-energy investments by 1.5 percent of GDP every year for 20 years will generate a net increase of about ten million jobs per year. This is after factoring in job losses resulting from retrenchments in the country’s fossil-fuel industries.

There is no guarantee that the jobs being generated through clean-energy investments will provide decent compensation to workers, strengthen workplace conditions or union representation, or expand opportunities for women, minorities, or other underrepresented groups. But the fact that new investments will be occurring, and that these investments will be publicly subsidized, will create opportunities across the board—for improving job quality, expanded union coverage, and more jobs for underrepresented groups.

At the same time, workers and communities throughout the world whose livelihoods depend on people consuming oil, coal, and natural gas will lose out in the clean-energy transition. In order for the global clean-energy project to succeed, it must provide adequate transitional support for these workers and communities. Pollin and Callaci (2016, 2018) have developed a Just Transition policy framework in some detail within the US economy; and Pollin et al. (2017a, 2017b) have developed a still more detailed approach around these issues for the US states of New York and Washington. Considering the United States as a whole, the authors estimate that a rough high-end estimate for such a program is a relatively modest $600 million per year (i.e., less than 0.2 percent of the 2018 US federal government budget). This level of funding would provide adequate funding in three areas: 1) income, retraining, and relocation support for workers facing retrenchments; 2) guaranteeing the pensions for workers in the affected industries; and 3) mounting effective transition programs for what are now fossil-fuel dependent communities. Comparable Just Transition programs will need to be implemented in other country settings.

Industrial Polities and Alternative Ownership Forms

To increase clean-energy investments by 1.5 percent of global GDP will not happen without strong industrial policies. Even though, for example, energy-efficiency investments generally pay for themselves over three to five years, and the average costs of producing renewable energy are at rough cost parity with fossil fuels, it is still the case that some entities—public enterprises, private firms, or a combination of both—will still need to advance the initial capital and bear the project risk.

Depending on specific conditions within each country, industrial policies will be needed to promote technical innovations and, even more broadly, adaptations of existing clean-energy technologies. Again, depending on circumstances, governments will need to deploy a combination of policy instruments, including research and development support, preferential tax treatment for clean-energy investments, and government procurement policies. Clean energy industrial policies will also need to include regulations of both fossil-fuel and clean-energy prices, as well as emission standards. In terms of financing, the experience in Germany is valuable here, since it has been the most successful advanced large economy in developing its clean-energy economy. According to the IEA, a major factor in Germany’s success is that its “state-owned development bank, KfW, plays a crucial role by providing loans and subsidies for investment in energy efficiency measures in buildings and industry, which have leveraged significant private funds” (IEA 2013). This German development-banking approach could be adapted throughout the world.

A major factor in this adaptation process will be to reduce the demands for profitability in new clean-energy investments. This, in turn, raises the issue of ownership of newly created energy enterprises and assets. Specifically: how might alternative ownership forms—including public ownership, community ownership, and small-scale private companies—play a major role in advancing the clean-energy investment agenda?

Throughout the world, the energy sector has long operated under a variety of ownership structures, including public/municipal ownership, and various forms of private cooperative ownership in addition to private corporations. Indeed, in the oil and natural gas industries, publicly owned national companies control approximately 90 percent of the world’s reserves and 75 percent of production. They also control many of the oil and gas infrastructure systems. These national corporations include Saudi Aramco, Gazprom in Russia, China National Petroleum Corporation, the National Iranian Oil Company, Petroleos deVenezuela, Petrobras in Brazil, and Petronas in Malaysia. But there is no evidence to suggest that these publicly owned fossil-fuel-based energy companies are likely to be more supportive of a clean-energy transition than are the private energy corporations. National development projects, lucrative careers, and political power all depend on continuing the flow of large fossil-fuel revenues. In and of itself, public ownership is not a solution.

Clean-energy investments will nevertheless create major new opportunities for alternative ownership forms, including various combinations of smaller-scale public, private, and cooperative ownership. For example, community-based wind farms have been highly successful for nearly two decades in Germany, Denmark, Sweden, and the United Kingdom. A major reason for their success is that they operate with lower profit requirements than big private corporations.

Global Fairness

It is one thing to conclude that all countries—or at least those countries with either large GDPs or populations—should invest about 1.5 percent of GDP per year in energy efficiency and clean renewable investments. But it is another matter to determine what standard of fairness should be applied in allocating the costs of such investments among the various people, countries, and regions of the globe. How should we allocate these costs fairly?

If the global clean-energy investment project sketched here is successful, average per capita CO₂ emissions will fall within 20 years from their current level of 4.6 tons to 2.3 tons, while total emissions will fall by approximately 40 percent, from 32 billion tons to 20 billion. Still, at the end of this 20-year investment cycle, average US emissions will be 5.8 tons per capita, nearly three times the averages for China and the world as a whole, and five times the average for India. At a basic level this is, of course, unfair. It is particularly unfair given that, over the past century of the fossil-fuel era, US emissions have exceeded those in India and China combined by around 400 percent.

In the name of fairness, one could, with good reason, insist that the United States and other rich countries be required to bring down per capita CO₂ emissions to the same level as low-income countries. We could also insist that high-income people—regardless of their countries of residence—be permitted to produce no more CO₂ emissions than anyone else.

There is a solid ethical case for such measures. But there is also absolutely no chance that they will be implemented. Given the climate stabilization imperative facing the global economy, there is simply no cushion of time for investing huge global efforts fighting for unattainable goals. Consider the US case: on grounds both of ethics and realism, it will be much more constructive to require that, in addition to bringing its own emissions down to about 6 tons per capita within 20 years, the United States must also assist other countries to finance and bring to scale their own transformative clean-energy projects.

The Problems with Degrowth

As I emphasize at the outset, degrowth proponents are making valuable contributions by addressing, broadly, many of the problems with economic growth. But on the specific issue of climate change, degrowth does not provide anything close to a viable stabilization framework. Consider some very simple arithmetic. Following the IPCC, we know that global CO₂ emissions need to fall from the current level of 32 billion tons to 20 billion tons within 20 years. Now assume that global GDP contracts by 10 percent over the next two decades, following a degrowth scenario. That would entail a reduction of global GDP four times larger than what we experienced over the 2007–2009 financial crisis and Great Recession. In terms of CO₂ emissions, the net effect of this 10 percent GDP contraction, considered on its own, would be to push emissions down by precisely 10 percent—that is, from 32 billion tons to 29 billion. So, the global economy would still not come close to bringing emissions down to 20 billion tons by 2040.

Clearly then, even under a degrowth scenario, the overwhelming factor pushing emissions down will not be a contraction of overall GDP but massive growth in energy efficiency and clean renewable energy investments (which, for accounting purposes, will contribute toward increasing GDP) along with similarly dramatic cuts in fossil-fuel production and consumption (which will register as reducing GDP). Moreover, any global GDP contraction would result in huge job losses and declines in living standards for working people and the poor. Global unemployment rose by over 30 million during the Great Recession. I have not seen any degrowth proponent present a convincing argument as to how we could avoid a severe rise in mass unemployment if GDP were to fall twice as much as during 2007–2009.

For nearly 40 years now, the gains from economic growth in virtually all countries have persistently favored the rich. Nevertheless, the prospects for reversing inequality in all countries will be far greater when the overall economy is growing, than when the rich are fighting everyone else for shares of a shrinking pie. Even thinking in strategic terms alone, attempting to implement a degrowth agenda would have the effect of rendering the global clean-energy project utterly unrealistic politically.

If we are serious about mounting a viable global climate stabilization project, we clearly have no time to lose in seeking to build a broadly conceived degrowth movement that, for the reasons outlined, cannot succeed in actually stabilizing the climate. This is even more emphatically the case when a fair and workable approach to climate stabilization lies right before us via the Green New Deal.