Balancing the Books on Climate Change

In the early spring of 2019, when the economy was strong and people mainly wore masks to rob banks, Senate Majority Leader Mitch McConnell took to the Senate floor to decry the Green New Deal. The resolutions New York Rep. Alexandria Ocasio-Cortez and Massachusetts Democrat Sen. Ed Markey had introduced in their respective legislative bodies hadn’t detailed specific policy remedies. But McConnell claimed to know enough about it to price it: $93 trillion over 10 years.

“Just how much of other people’s money are Democrats proposing to burn,” he asked, “in this effort to turn the country into a far-left fiction novel?”

McConnell’s number came from Douglas Holtz-Eakin, former Congressional Budget Office Director under President George W. Bush, and now president of the American Action Forum, a conservative think tank. It’s a high estimate, factoring in $44 trillion over the decade for guaranteed jobs and $36 trillion for universal health care, both of which are stated ideals of the proposal but not directly climate-related.

Holtz-Eakin’s analysis also overlooks the parts that would save people money: He wants to know, for instance, why energy-efficiency retrofits of buildings matter in a wind-and-solar powered world, neglecting the obvious point that efficiency reduces demand, which is part of what makes a green grid possible. (McConnell seemed similarly flummoxed: “Our friends on the far left also propose a federally mandated overhaul of every building in America,” he fumed. “Every building in America!”)
 

The mammoth project of maintaining a global temperature that’s tolerable to humans is going to cost a lot of money.

 
Still, Holtz-Eakin’s basic premise is sound. The mammoth project of maintaining a global temperature that’s tolerable to humans – decarbonizing the electrical grid, rolling out a high-speed rail network, launching a nationwide fleet of electric vehicles – is going to cost everybody a lot of money. The Kentucky Republican who leads the Senate is no doubt honing that message for electoral advantage even as we speak.

No candidate running on a pro-climate platform can run from this fact, nor can she avoid the question of how to pay for a Green New Deal; it’s too much on everyone’s minds these days. But there is an argument to be made, say researchers and green economists, that investing in green infrastructure is sound monetary policy – even while governments are struggling to dig themselves out of their COVID-19-related economic holes.

“This is the moment when all economies and all populations are ready to take on debt to restart the economy,” says Niklas Höhne, a climatologist who worked on the Fourth and Fifth Assessment Reports from the Intergovernmental Panel on Climate Change (IPCC). “We will only get to spend this money once. The next chance won’t come for a long time.”

Höhne lives in Germany, where “30 percent of the gross domestic product is being spent on economic recovery,” he says. For the U.S., the math is almost the same: Congress has already spent $2.5 trillion on unemployment payments and relief for businesses, some less worthy than others. Economists expect we’ll have to spend at least $2 trillion more, which adds up to a little less than one-quarter of the nation’s $20 trillion GDP in a single year.
 

“To get energy transition on a pathway to save the climate, we only need 2.5 percent of global GDP to be invested in green technologies each year.”

 
That’s more than even Holtz-Eakin imagines switching to clean energy would cost, and a far greater investment than the IPCC and Höhne’s group, the NewClimate Institute, say is necessary to avert catastrophe. “To get the energy transition going on a pathway to save the climate, we only need 2.5 percent of global GDP for all countries to be invested in green technologies each year,” Höhne says. “If only a little bit of that money is used for economic recovery and climate change, then we’ve already gained a lot.”

We’ll have gained more, in fact, than if 2.5 percent of U.S GDP were invested in the energy transition during the longest economic expansion in U.S. history, which ended abruptly in March. Back then, building out clean energy infrastructure would have meant pulling workers from one line of work to another, or “job shifting,” says Josh Bivens, director of research for the Economic Policy Institute. And that would have been fine, “but you’d only be solving the one problem,” which is climate change. “Now you’d solve that problem and create a bunch of jobs for people who actually need them because they’re unemployed.”

And don’t fear debt or deficits, Bivens says. Even in a strong economy, government borrowing “puts upward pressure on interest rates,” which makes private investment more expensive, crowding out investors who would build inefficient office parks or back conventional energy production. “And that’s actually the whole point,” Bivens says. “One reason why the climate situation is so grim is that we’re bequeathing into the future this conventional capital stock” – coal plants, drafty buildings, oil production – “that is way too dirty. We want to crowd that out with green capital, and that’s exactly what deficit-financed green public investments would do.”

*  *  *

So what happens if we stick with business as usual? If we decide, as a country, as a world, that 2.5 percent of global GDP is just too much money to spend to keep the planet from warming more than 1.5 to 2 degrees Celsius above pre-industrial levels climate scientists say is necessary to avert catastrophe?

What’s the cost, then, of fires, floods, disease, and everyone who lives near a river or ocean being forced to retreat?

Variables abound. A 2017 analysis by EPA scientists found that a difference of less than two degrees of warming could cost roughly $224 billion every year, and limiting global temperature to 2.8 degrees Celsius (as opposed to a worst-case scenario of 4.5 degrees) would save $10 trillion by the end of the century. But they examined “just a fraction of the potential risks and damages,” the researchers wrote; the real total is probably impossible to grasp. Another more recent study estimates a cost of almost $792 trillion over the next century for all countries combined.

Any such accounting is bound to be flawed, not just because such an unprecedented altering of the earth’s atmosphere is hard to parse out in purely financial terms, but because there’s so much about a comfortably habitable planet that can’t be quantified. What’s the value of being able to take a walk on a cool summer morning, or swimming in the lake you built your house on, which you’re still able to do because the lake hasn’t dried up in an epic drought or become clogged with algae blooms? Even pricing the material loss of the wildfire that destroyed the town of Paradise, California, two years ago ($8 billion), killing 86 people, misses the nonmonetary toll on the residents’ mental health, their lost sense of community, their elemental well-being.

“This is a classic issue for environmental projects,” says Stan Meiburg, the director of graduate sustainability programs at Wake Forest University and a former EPA regional administrator. “The benefits are broad and extend across large numbers of people, and they’re not as immediate as the costs are.” Only one thing’s for sure: Whatever the cost of action is now, it’s less expensive – much, much less expensive – than waiting.
 

“The old saying about how an ounce of prevention is worth a pound of cure is more like an ounce of prevention is worth six pounds of cure in the environmental space.’

 
In the realm of total quality management, they call it the 1-10-100 principle: “If it costs you $1 to prevent something going wrong, it will cost $10 to catch errors in an inspection process, and $100 if something goes out with an error and you have to go back and fix it,” Meiburg says. It applies not just to mitigating climate effects by cutting emissions but to adapting to what a warmer planet has already wrought.

As an example, Meiburg cites the 2008 collapse of a coal-ash pond in Kingston, Tennessee, while he was the EPA administrator for the region. The disintegration of an earthen dike after heavy rainstorms sent more than a billion gallons of toxic waste into the Emory River, a source of drinking water for millions of people. The utility that dumped the waste, the Tennessee Valley Authority, Meiburg recalls, could have shored up the dike for around $50 million. Instead, it took some 900 workers and more than seven years to clean it up at a cost of more than $1 billion. Hundreds of those workers were later diagnosed with cancers they blame on coal-ash exposure.

“The old saying about how an ounce of prevention is worth a pound of cure is more like an ounce of prevention is worth six pounds of cure in the environmental space,” Meiburg says. That’s as true for air pollution and toxic waste as it is for disease prevention or the Green New Deal. “If we go about [implementing] it thoughtfully,” Meiburg says, “we can prevent damages that otherwise would create much larger costs for us as a society.”

We can only hope that we don’t find out in the future exactly what those larger costs are.

Copyright 2020 Capital & Main