Guest essay by Eric Worrall
Don’t mention the “N” word – top economist Joseph Stiglitz has urged the US government to impose economically painful taxes to penalise fossil fuels, to facilitate a switch to renewables and energy efficiency technologies which have not yet been developed.
Nobel-Winning Economist to Testify in Children’s Climate Lawsuit
Joseph Stiglitz writes in a court brief that fossil fuel-based economies impose ‘incalculable’ costs on society and shifting to clean energy will pay off.
BY GEORGINA GUSTIN
JUL 11, 2018
One of the world’s top economists has written an expert court report that forcefully supports a group of children and young adults who have sued the federal government for failing to act on climate change.
Joseph Stiglitz, who was awarded the Nobel Memorial Prize for economics in 2001 and has written extensively about environmental economics and climate change, makes an economic case that the costs of maintaining a fossil fuel-based economy are “incalculable,” while transitioning to a lower-carbon system will cost far less.
The government, he writes, should move “with all deliberate speed” toward alternative energy sources.
Stiglitz has submitted briefs for Supreme Court cases—and normally charges $2,000 an hour for legal advice, the report says—but he wrote this 50-page report pro bono at the request of the attorneys representing the children. It was filed in federal district court in Oregon on June 28.
Although the report repeatedly mentions and references former NASA GISS director James Hansen, who is a fan of nuclear power, Stiglitz himself does not directly mention the nuclear option, instead urging carbon taxes and “support” for the development of renewable alternatives to fossil fuels.
Moving the U.S. economy away from fossil fuels is both feasible and beneficial, especially over the next 30 years (as technological and scientific evidence discussed below makes clear). Defendants could facilitate this transition with standard economic tools for dealing with externalities, for example a tax or levy on carbon (a price on the externality) and the elimination of subsidies on fossil-fuel production. Relatedly, decisions concerning the transition off of fossil fuels can be reached more systematically and efficiently by revising current government discounting practices, the methodology by which future costs are compared to present costs. Current and historical government decision making practices based on incorrect discount rates lead to inefficient and inequitable outcomes that impose undue burdens on Youth Plaintiffs and future generations.
There are many reasons to be optimistic that emissions could be curtailed further than previously thought. These benefits are a result of continued technological development in the renewables sector. Because of technological improvements, the costs of renewables and storage are decreasing. The price of solar panels has dropped by more than half in recent years (80 percent reduction from 2008 to 2016). In 2016 alone, the average dollar capital expenditure per megawatt for solar photovoltaics and wind dropped by over 10 percent. As these technologies continue to improve and the efficiency increases, while manufacturing costs drop, these technologies will more easily substitute for existing fossil fuel infrastructure.
With the oil crises of the 1970s, recognition of the risks of dependence on oil was developed (though these risks were markedly different from those with which we are concerned today). Even then, it was clear that there were viable alternatives, and with the appropriate allocation of further resources to R&D, it is likely that these alternatives would have been even more competitive.
In my opinion there is a lot wrong with Stiglitz’s effort – surprising given his reputation.
Stiglitz seems to be committing the economic sin of treating future projections of technological advances and climate impacts as if they were high confidence.
Extrapolating renewable costs into the future is risky. Renewables may never achieve anything resembling cost parity with existing technology, or even large scale viability. In 2014, Google researchers discovered to their horror there was no viable path to a 100% renewable future using anything remotely resembling current technology. Betting the future economic wellbeing of the nation on solving serious problems which may not be solvable is a wild gamble.
Stiglitz claims substantial fossil fuel “subsidies” are arising due to inadequate treatment of externalities. Externalities are costs which don’t show up on your balance sheet. For example if your business keeps costs down by dumping trash on your neighbour’s property, you aren’t paying the true cost of dealing with with the trash – the cost of dealing with the trash is an externality, because it doesn’t show up on your balance sheet, at least until your neighbour figures out who has been dumping trash on their property.
But the claimed externality costs of CO2 only apply if CO2 emissions cause future harm. We’re not talking about trash which causes an immediate smelly mess, we’re talking about an invisible trace gas which may or may not cause a future problem.
As climate scientists themselves occasionally admit, the climate models which predict future harm are not scientifically falsifiable – they cannot be adequately tested except by waiting to see if they do a good job of predicting the future. Older models are not doing a good job of predicting future climate – as the controversy over the failings of James Hansen’s models demonstrates, relying on expert opinion in place of scientific falsifiability simply isn’t good enough.
Stiglitz solutions, even if they were viable, would be economically painful. Carbon taxes hurt poor people worst of all – a fact Stiglitz admits, though he qualifies his admission with claims that short term harm is worth the future benefit.
Nevertheless short term harm is no laughing matter, particularly when the harm is visited on society’s most vulnerable. You would want to be absolutely certain of the desperate need to impose increased hardship on people who are already struggling, you would want to thoroughly explore possible alternatives to hurting poor people, before concluding hurting the poor was the only available option.
Which is why Stiglitz’s omission of direct mentions of nuclear power is puzzling.
France converted 75% of their electricity to nuclear power in the 1970s. They kept costs down by standardising and mass producing nuclear plant components, and reprocessing nuclear fuel. French electricity is affordable, dispatchable and produces very low CO2 emissions. The cost of low emission French power doesn’t hurt poor people.
According to the EIA, US power plants emitted 1744 million tons of CO2 in 2017. Nuclear power currently produces just under 20% of US electricity. Copying the 1970s French nuclear programme, raising nuclear power to 75% of US electricity production, would reduce power plant CO2 emissions to 1744 / 80% x (100% – 75%) = 545 million tons per annum, saving over a billion tons per annum of CO2 emissions.
For shame Joseph Stiglitz. If CO2 is the serious issue Stiglitz claims, ignoring the possibility of avoiding harm to poor people by converting US electricity production to affordable nuclear power seems a very curious oversight.