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Wednesday, 22 September 2021

Policies against climate change

A new approach to investment and growth linked to generating decent jobs is needed in the post-pandemic period that pays particular attention to the need to combat climate change

Mahmoud Mohieldin , Tuesday 29 Jun 2021
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I recently heard the famous quotation “the future isn’t what it used to be” used at a university commencement ceremony in the UK. 

The speaker, a graduating student delivering the valedictory address, said that as pleased as she and her colleagues had been with their studies and academic achievements, they were more afraid than ever of what awaited them outside the university. 

Economies were in havoc due to the Covid-19 pandemic, and trade wars were resuming in full force. Measures to combat climate change were unlikely to be kind on the job market. The fears of the speaker, of African origin, were well founded, and millions of her fellow graduates share them. But sympathy and understanding are not the way to make the problems go away. What is needed is a new approach to investment and growth, an approach integrally linked to generating decent jobs.

Officials in the developed nations frequently use the expression “building back better” when speaking of the post-pandemic recovery. The concept is associated with “smart” or “green” growth that relies on digitisation and environmentally friendly technologies. The governments of the developed countries have allocated huge resources for this purpose, aided by the low interest rates and the unprecedented spending facilities that their central banks have made available to them. 

In some of these countries, public spending on the pandemic and economic recovery can amount to more than 10 per cent of GDP, and they are prepared to spend more until they are assured that the recovery is safely on track.

The developing countries are in an entirely different position. As though their recovery prospects were not sufficiently jeopardised by the Covid-19 variants, shortages of vaccines and the fewer resources available for public spending, together with the resurgent international dispute over the priorities for combating climate change and the sharpening of protectionist measures, threaten to disadvantage them further. 

As new generations of young people enter the labour markets in third world countries, we can only reiterate the concerns of the UK university speaker regarding their employment prospects. How can we forge policies that promote investment, employment and growth and overcome the challenges to funding such policies in a global environment characterised by disputes over climate change and trade wars?

To begin with, it would be unwise to adopt climate-change policies outside of a framework for sustainable development. Anyone following the debate over climate change will have observed the excessive politicisation of priorities and the sharp polarisation surrounding the various policies to deal with it. 

Political ideologies have elbowed out scientists. The debates are raucous, angry and charged with a zealotry reminiscent of the Middle Ages. On one side you have activists trying to shout down sceptics on the other, while from this corner and that come cries of “heresy” as if we were in a religious debate.

 One would have thought that in an age that boasts of its scientific progress, an empirical spirit would prevail and corroborated proof would serve as the basis for rational discussions on climate change. Science has confirmed beyond a doubt the environmental and life-threatening dangers hanging over the planet as a result of increasing carbon emissions. Logically, there should follow measures to counter such dangers, and in fact an international treaty was drafted and signed in Paris in 2015. 

However, the next step was to put it into effect, meaning that the wealthy nations that signed the Paris Agreement should meet their pledge to allocate $100 billion a year to the developing nations to help them fund projects to bring their industries and other carbon-producing sectors into line with environmental requirements. 

Those countries have not fulfilled their pledge, for them a paltry sum, while for the developing nations it is extremely costly to make the adjustments required to help rectify the environmental damage caused by emissions that have come primarily from the developed nations.

 

DANGERS: According to the World Resources Institute (WRI), the nine most environmentally harmful activities include electricity and heat production (accounting for about 33 per cent of greenhouse gases); transportation and communications (15 per cent); manufacturing and construction (13 per cent); agriculture and animal husbandry (11 per cent); the burning of fossil fuels (eight per cent); energy-intensive industries such as aluminium smelting and cement production (six per cent); equatorial deforestation (six per cent); energy related emissions (five per cent) and landfills for refuse and solid waste (three per cent).

All these activities are most heavily concentrated in countries that have the highest incomes and consumption rates. Clearly, these countries should support the bulk of the burdens of mitigation, rather than throwing much of the weight onto the shoulders of others.

A major part of the adjustment needed to manage the effects of climate change entails operating the vital sectors mentioned above in more energy efficient and environmentally friendly ways. This raises the question of how to find economic solutions that simultaneously benefit people. Investing in technology and research comes first. Thanks to efforts made in this domain, alternative energy sources have become more widely available, more efficient and less costly. 

According to the most-recent report of the International Renewable Energy Agency (IRENA), solar energy costs 16 per cent less than it did last year and onshore and offshore wind-generated energy fell by 13 and nine per cent, respectively. In a larger timeframe, solar and wind energy are 85 per cent and 52 per cent cheaper than they were a decade ago.

This is unquestionably good news. But it does not dispense with the need to manage the transition carefully and not to allow the anxiety over climate change to lead to a precipitousness that could have highly detrimental effects in terms of jobs and other crucial economic factors that could ultimately backfire on the climate-protection policies themselves.

It is important to bear in mind that climate protection is number 13 of the UN’s 17 Sustainable Development Goals (SDGs). These are interlinked, so none can be regarded as less important than the others. Ending extreme poverty, eliminating hunger, ensuring good health and well-being, ensuring quality education, decent work and economic growth, and providing affordable and clean energy are only a few of the SDG priorities for healthier societies and economies around the world.

The return to protectionism will not advance these goals. Yet, it appears that the developed nations will never tire of promoting policies they deem good for humanity only for as long as their own nations benefit. The deregulation of world trade and the elimination of customs and quota barriers is a case in point. 

The industrialised nations quickly blamed the global trading system for the failure of their commercial and industrial projects when the fault actually resided in decreased production, inefficiency, mounting labour costs and declining skills at home. Populist movements then vented their anger on imports from countries that offer better-made, higher-quality and less-costly products, and some governments catered to the gallery and to a nostalgia for their industrial heydays by slamming down tariffs, erecting barriers and other measures to curtail competition and increase support for industries that have lost their competitive edge. 

The net effect of such measures has been to increase public expenditure at the taxpayers’ expense. In “The Price of Nostalgia: America’s Self-Defeating Economic Retreat,” an article that appeared in the US journal Foreign Affairs in May-June 2021, and in “America’s Muddled Industrial Policy,” which appeared on the Project Syndicate news site on 25 June, the US economists Adam Posen and Anne Krueger, respectively, warn of the costly repercussions of overindulging in policies informed by the good intentions of creating jobs, protecting domestic industries, and increasing government spending towards these ends, because such policies fail to produce companies that can thrive on their own, making them a constant drain on resources.

The state certainly has a role to play in remedying the deficiencies of the market and the inability of private firms to compete or meet development needs. However, rather than focusing investments on individual firms or otherwise pouring good money after bad, public resources would be more wisely spent by being invested in infrastructure and technology, research and development, improving education and healthcare, skills development and retraining, and other activities that improve human capital. 

This is the most effective way to increase competitiveness in a rapidly changing world. 


*An Arabic version of this article appeared on Wednesday in Asharq Al-Awsat.

*A version of this article appears in print in the 1 July, 2021 edition of Al-Ahram Weekly

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