Climate Change

and
Sustainability in
the 21st
Century

© Dünhaupt, Dullien, Goodwin, Harris, Nelson, Roach, Torras; edited Tahmina Khanam
Learning Goals

– Identify major environmental challenges.

– What is climate change?
– Have a basic understanding of the relationship of climate
change to economic growth
– Describe several policies directed towards sustainable
development.

2
Major environmental issues: global population

 dramatic increase in world population:

– in 1960: 3 billion

– in 2000: 6 billion

– in 2011: 7 billion
 human population growth contributes to increases in many
environmental pressures:
– e.g. food production:

– land degradation

– pollution from fertilizers and pesticides

– overtaxing of water supplies

3
Major environmental issues: resource depletion

 world's fisheries are in decline due to overfishing

 tropical forests are lost at a rapid rate
 a billion people live in countries where usable water is
scarce
 stocks of mineral resources are being depleted
 global production of oil will peak within the next few
decades
 current dependence on fossil fuels could challenge
potential for industrialized countries to maintain their
living standards and for developing countries to reduce
poverty
4
Major environmental issues: pollution and wastes

 industrial countries generate major share of the

world’s pollution and waste
(two-thirds of global industrial waste)
 toxic wastes are exported from industrialized
countries to low-income countries

5
Major environmental issues: the race between
technology and resource depletion
 economic growth is associated with productivity gains from
being able to produce goods and services with progressively
cheaper resources
– when wood and whale oil became scarce, they were replaced by fossil
fuels
– “Technological optimists” believe than humans will always be able to
come up with technical solutions for resource scarcity
 but:
– Do substitutes exist for all resources?
– Are some resources more essential than others? (There is no substitute
for potable water)
6
Even renewables might be exhaustible

 fish: a renewable or reproducible resource

 but: renewable ≠ inexhaustible
 many deep-sea-fish are seriously depleted
 technological change has contributed to the decline
– larger boats
– drift nets
– Sonar technology for finding fish

7
Climate Change
Greenhouse emissions and global temperature change

 emissions of various greenhouse gases trap heat near

the earth’s surface, leading to:
– general warming trend
– sea-level rise
– ecological disruption
– increase in severe weather events (hurricanes, floods,
droughts…)

9
 Figure 19.1 Global temperature trends, 1900–2100
 Global average temperature is predicted to be between 3 and 7 degrees
Fahrenheit warmer in 2100 compared to preindustrial levels.
Temperature Change (degrees Celsius)
Temperature Change (degrees Celsius)

High
High Projection
5 Projection

1
Low Projection
Low Projection

1800 1850 1900 1950 2000 2050 2100

Year 10
Year
Costs of climate change

 costs of climate change in the 21st century between

5 % and 20 % of global GDP
 most severe effects of climate change could be avoided
at a cost of approximately 1 % of GDP
 most dangerous impacts of climate change are not likely
to occur for several decades or more, the actions taken
in the next few decades will almost surely have a
profound effect on those ultimate impacts
 climate change is likely to exacerbate global inequalities
and impede economic development in poorer countries

11
National and global responses to the climate challenge

 modern environmental problems require a coordinated

international response
 Kyoto Protocol: committed industrialized countries to reduce
their greenhouse gas emissions by an average of
5 % below their 1990 emissions by the period 2008-2012
– drafted in 1997; ratified in 2005
 Paris Agreement: December 2015
– each country is supposed to set its own goal for the reduction in
greenhouse gas emission
– treaty does not include any mechanism to actually enforce the
commitments
12
The cost of responding versus the cost of inaction

 large-scale energy transition away from fossil fuels

have significant costs
 but: modest on a macroeconomic scale
 costs should be balanced against growing costs that
are likely to be caused by climate change:
– damage from extreme weather events
– agricultural output losses
– possible effects of famine, armed conflict, mass migration

13
Economic Growth and the
Environment
What kind of policies would be required to promote
ecological sustainability?
How can policies be designed so that they also maintain
well-being and promote human development, especially
in developing countries?
 “sustainable growth”: a contradiction in terms?

– no system can grow without limit

 specific policies for sustainable development are
needed

15
Green taxes

 make it more expensive to undertake activities that deplete

important natural resources or contribute to environmental
degradation
 discourage energy- and material-intensive economic
activities while favoring the provision of services and labor-
intensive industries
 green taxes as a means of internalizing negative
externalities such as pollution
 objections:
– green taxes fall disproportionately on lower-income households

– green taxes are politically unpopular

16
 Figure 19.4 Environmentally based taxes as a share of
total tax revenue, selected industrialized countries,
2013
 Environmentally based taxes account for 9 percent of total tax revenue in Denmark
and the Netherlands, but only about 3 percent of total revenue in the United
States.
10%
9%
8%
7%
Percent of total tax revenue

6%
5%
4%
3%
2%
1%
0%
tes ada nce pan ay
d e n
an y
an d
o m alia taly ark nds
a
St Can Fra Ja o rw e rm inl ngd str I
n m rla
w u
ti e
d N S G e F K i A D e
the
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U Source: OECD, 2016. i t 17
U n
Eliminating subsidies

 agricultural and energy subsidies that encourage the

overuse of energy, fertilizer, pesticides, and irrigation
water could be reduced or eliminated
 this would improve government finances
 money saved could be used to:
– lower taxes
– promote more sustainable agricultural systems

18
Recycling and renewable energy

 promote greater recycling of materials and the use of

renewable energy through policies such as:
– deposit/refund systems
– targeted subsidies
 governments can support expansion of energy from
solar power, wind, and geothermal heat

19
Tradable permits

 set an overall limit on pollution

– limited number of permits
– allowing the emission of specific quantities and types of
pollution
 a process of pollution reduction may be most
efficiently achieved by allowing businesses to choose
between finding low-cost ways to reduce their
emissions and paying to buy permits
 after permits are distributed to firms, they can then
buy them from or sell them to other firms
20
Nudging toward sustainable transportation

 efficient transportation systems can replace energy-

intensive automotive transport
– high-speed trains
– public transit
– greater use of bicycles
– redesign of cities and suburbs to minimize transportations
needs
 government needs to finance and conduct
investments
21
Feed-in tariffs

 used to promote the construction of renewable

energy supplies
 suppliers of power from renewable energies get the
right to feed their electricity into the grid at a
predetermined rate (above the market rate for
electricity)
– allows renewable energy to be competitive
– creating an incentive for the installation of renewable
energy capacities

22
Debt-for-nature swaps

 forgiving debt of developing countries in exchange for

agreements to protect nature reserves or pursue
environmentally friendly policies
– in 2002, the U.S. cancelled $5.5 million in debt owed to it by
Peru in return for Peru’s agreement to conserve 10
rainforest areas covering more than 27.5 million acres

23
Sustainability and consumption

 idea: replace the goal of ever increasing consumption

with the goal of sufficiency
– at the individual level:
• the amount of consumption that is sufficient to support human
well-being

– at the macro level:

• what kinds or amounts of consumption can be sustained, by
humanity as a whole, without destructive environmental
consequences

24
Sustainability and investment

 strategic investments that focus on areas such as

– alternative energy
– public transportation
– sustainable agriculture
– education
– health services
 could move countries toward a more environmentally
sustainable economy

25
Are Stabilization and
Sustainability in Conflict?
What do we really want from employment?

 quality, types and intensity of employment

 people benefit from hours they spend away from paid
employment
 keep employment levels high while reducing material
and energy throughput
 What sorts of and how much employment do we
really want?

27
What do we really want from production?

 composition of output makes a very big difference

– shifting toward producing goods and services that are environmental beneficial
could allow an economy to maintain consumption, investment, and employment
in a less environmentally damaging way
 population stabilization
– growing ratio of retirees to active workers

– increased demand for workers in medical and social services

 investment
– investments in energy-saving infrastructure for transportation

– in wetland restoration

– in conversion of residential and commercial buildings to more environmental

friendly patterns of energy and chemical use
28
Sustainability at the local level

 sustainable development can also be developed from

the bottom up
 many changes in the organization of modern human life
that are central for a shift toward more sustainability can
only be brought about at the initiative of the local level
 e.g. enable people to go to work, take their children to
school, and do their shopping without the excessive use
of cars
 residential and commercial areas need to be planned to
be reached easily, and noncar transportation links such
as bicycles lanes or trams need to be provided
29
Macroeconomic policies for stabilization and
sustainability
 rather than growing indefinitely, national and global
economic systems must follow a logistic pattern, in
which growth is limited
– leading to a steady-state economy
 environmental limits on growth apply to resource and
energy consumption
 environmental neutral or friendly activities could
continue to grow

30