Articles by Gar Lipow

What stops us from acting more boldly on economic and environmental policy

[Note: Since comments are turned off, if you have thoughts, email me at glipow AT gmail.com. ]

A lot of energy is expended on Grist showing that good environmental policy is good economic policy -- to show that green pays. But it is just as important to show the same thing from the other direction. Economic policy will only pay if includes strong environmental features. Let's look at the current responses to our economic crisis from that perspective. We'll start by comparing what we are doing as compared to what we should be doing, and then move on to explaining the difference.

Let's start with the economic stimulus package that was just passed. It is not nearly big enough. It was structured on fighting a smaller unemployment rate than we already face, let alone the rate at which unemployment will peak. Those radical leftists in the World Bank are noticing that the recession is worldwide, which would indicate a deeper recession than Obama's stimulus was intended to fight. Though you would not know it from the corporate media, quite a number of respected economists predicted from the beginning that this was too small a stimulus. Even intelligent conservatives are starting to say we need a second, bigger stimulus.

Where to put the money from a second stimulus? Keeping public transit going, which otherwise loses subsidy revenue during downturns, gives a double return in not only saving jobs and demand that would otherwise collapse, but also reducing oil use, greenhouse gas emissions, and traffic congestion. In general, making up for losses in state and local revenues reduces pro-cyclical job losses that otherwise make a recession worse.

But we have good reason to consider long-term investment in infrastructure as well. Much necessary infrastructure spending is "shovel-ready." For example, suppose we decide to put $450 billion into upgrading our freight rail system to move 85 percent of long-haul trucking miles to rail? We can invest immediately into the planning this will entail. And we can stockpile parts and materials we know this upgrade will require. And we can implement already proposed unfunded short-term projects that will be needed components of such an upgrade: new switch yards, new freight yards, and various other log-jam breaking proposals.

Sheer number of solar advancements suggests that cheap solar electricity is coming soon

Concentrating solar power is a well-known approach to lowering the cost of solar electricity. You focus sunlight from a large area onto a small one, the same way a magnifying glass can set a piece of newspaper on fire, using one small, high-quality solar cell and a concentrator for a lower total cost than hundreds of slightly cheaper cells. (Or you can use the concentrated heat to drive a heat engine, but not in the example we are about to discuss.)

Morgan Solar has a smart variation on this under development. They start with a clever acrylic concentrator that uses pure optical guiding to concentrate solar energy about 50 times, around the same results as a Fresnel lens, but without the need for curves or a non-zero focus. This already moderately concentrated solar is then concentrated further by a much smaller glass concentrator that also needs no air gap. Because neither concentrator requires an air gap, a tiny solar cell is attached directly to the glass.

So you have an eight-inch acrylic concentrator, a glass concentrator the size of an American nickel, and a solar cell the size of a baby's thumbnail.

Low permit prices undermine infrastructure transformation

Back when I worked developing large software systems, every now and then we ran into a bug that management decided was too much trouble to fix -- "It's not a bug. It's a feature!" This is the approach that Kevin Drum seems to be taking when it comes to volatility in cap-and-trade programs.

The short version of the volatility problem is that with a trading system, permit prices vary not only in response to how many permits are issued, but also in response to general economic conditions. As a result permit prices bounce up and down a lot. Kevin, like a number of cap-and-trade supporters argues that this volatility is a good thing, because permit prices drop during bad times when people don't have money to invest, and they rise during times when they do. In short they argue that counter-cyclicality makes volatility positive rather than negative. But, just as in the software industry, I'm afraid it is still a bug, not a feature.

To the extent that emissions pricing accomplishes anything it drives investment in emission reducing infrastructure. But when emission prices drop too low, firms project long-term prices to be low as well. Managers get a lot more points for increasing or preserving market share than they do for managing environmental risks. Top bosses don't want to hear that emissions costs are going to rise, and the company needs to invest in reductions to comply with a cap-and-trade system. They want to hear that they can concentrate on their core business and buy low-cost permits from all the other firms reducing emissions. There is always a sound business case to be made for the other guy to reduce his pollution.

Higher productivity and lower health costs outweigh additional spending

Grist has discussed the consensus among most economists that the net cost of solving the climate crisis will be around 1 percent of gross domestic product (GDP). Basically this consensus says that total expenditures in various greenhouse gas emitting sectors will increase by 1 percent for the same economic output if emissions are controlled.

To be fair to economists, these estimates are based on studies that include substantial increases in energy efficiency -- even count some of the maintenance and capital savings. They are actually taking a stab at following Amory Lovins' dictum to count all costs and benefits.

Nonetheless, I think there are some good reasons why the consensus is wrong about there being a net cost at all. I think the overwhelming evidence is that a climate-stable future will have a higher GDP, even before avoided climate disruption is counted.

The main extra benefits economists overlook are the helpful side effects other than mitigating the climate crisis -- "positive externalities," in economic jargon.

For example, about half of all economic activity takes place in climate-conditioned buildings. Greening these buildings could increase[PDF] productivity [PDF] by around 10 percent. Similarly, switching most long-haul freight trucking miles to long-haul freight rail would increase productivity in transportation. Many energy-saving practices in industry, such as reducing scrapping and reducing spills and other types of emitting stoppages, would increase productivity as well. A switch to wind and solar would reduce labor productivity in the electricity sector; the conventional wisdom is that a switch to organic agriculture would do the same in that sector, though I think this is much less certain that people think. At any rate, sectors where productivity would rise greatly outnumber the tiny sectors where it might fall -- resulting in a huge net increase, probably greater than 5 percent for the economy as a whole.

Another example would be huge benefits to health. Eliminating or greatly reducing the use of fossil fuels would reduce air pollution, water pollution, and exposure to toxics. A switch to organic and low input agriculture would decrease direct ingestion of toxics, and increase available vitamins and minerals in food. Whether such a switch alone would encourage a switch to healthy increase in the consumption of non-starchy vegetables and fresh fruits I don't know, but it certainly could be part of policy that accomplished this. Overall, I think it is almost impossible that switching from fossil fuels to renewables and efficiency, that switching from toxic soil-consuming agriculture to non-toxic soil building agriculture, from unsustainable to sustainable forestry, would not increase GDP.

Two last points.