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We long fretted about whether there would be enough fossil fuel left in the earth crust to cover our energy needs. Now it turns out that the worse we could do would be to extract it and burn it all. (And that was before the appearance of shale gas, fracking and new oil finds offshore from Brazil.) This realisation has led many governments to make great efforts to curb the consumption of fossil fuel. The results so far have been dismal. But there is another way to accomplish the same thing: extract less of it from underground to start with. That would inevitably lead to less fossil carbon being combusted. Unfortunately, nobody appears to have hit upon this option. At least, not until Hans-Werner Sinn broached the idea in a series of scholarly papers in 2007, which then led to his German best-seller Das Grüne Paradoxon. Its English-language version, The Green Paradox, has just been published by MIT Press. The book starts out by reviewing and explaining the scientific evidence that points to a man-made global warming problem that could spell disaster for mankind. It also explains how, before the advent of large-scale fossil fuel extraction, humanity was caught in a Malthusian trap. Very simply put, the availability of biocarbon kept population growth in check, since land was used both for the provision of food and energy. Any increase in living standards entailed more energy consumption, which limited food supply. Conversely, any increase in population demanded more food, leaving less land available for energy supply. Fossil fuels changed all this. Tapping the planet’s carbon stocks meant that energy was now available in large quantities, liberating land for the production of food instead of fodder or fuel. A long period of unprecedented prosperity ensued. And we would have happily continued like this forever, were it not for the fact that we are slowly killing the planet in the process. As the book starkly puts it, every atom of carbon we extract from the ground ends up eventually as carbon dioxide in the atmosphere. While much of it is reabsorbed by the oceans and forests, the excess simply accumulates in the air, where it can stay for tens of thousands of years, trapping heat and elevating the planet’s temperature. Stopping this is the new imperative. Europe was the first to take up the challenge, quickly becoming the world’s centre for green policy, with Germany at the forefront. Germany is now world champion in solar power and biodiesel, vice-champion in wind power, and the only country adamantly determined to turn its back on nuclear power. It pursues the green idea with nearly religious intensity. But the results have been frustrating. Throughout Europe and elsewhere, politicians are keen to curb fossil energy consumption. They are busily promoting alternative energy, improved building insulation and more efficient cars. They forbid their citizens to use traditional light bulbs, force them to buy expensive green electricity and biofuels, impose emission constraints on car engines and subsidise electric cars, and they frighten their citizens with the announcement that they will come up with even tighter measures in the future. These programs cost hundreds of billions and yet, to a large measure, achieve nothing. The relentlessly rising curve of worldwide CO2 output does not deign to honour these efforts even with the merest downward kink. In quantitative terms the most important green energy source that is currently being developed is biofuels. This is not only problematic, but downright dangerous, both for the climate and for world peace. Replacing fossil carbon with biocarbon not only accelerates global warming, but deprives the world’s poor of their food. It puts in the tank what those on an empty stomach would like to see on their tables. The link that has been re-established between the fossil and biocarbon markets is a tragic development of historical dimensions, one that risks pushing mankind back into the Malthusian trap. By neglecting the supply side of the carbon markets, the policies against global warming simply disregard half of the market for fossil fuels and ignore the fact that the fossil resource owners are the real climate makers. By inserting fossil carbon into the carbon cycle by way of supplying it to the markets, enlarging thus the stock of carbon dioxide in the atmosphere, they determine the speed of global warming and, consequently, hold the fate of humanity in their hands. The resource owners regard the tightening of green policy measures with increasing concern, because they perceive them as a destruction of their future markets. Quite understandably, they try to pre-empt the expected wealth losses by extracting and selling their fossil fuels before their markets disappear. That is the Green Paradox: announced future reductions to carbon consumption may have the effect of accelerating climate change now. But how can you induce resource owners to leave more carbon underground? The book acknowledges that this will not be easy with the policy tools that the industrialised countries have at their disposal. Uncoordinated measures by single countries or groups of countries such as the EU will achieve nothing, other than inducing resource owners to overextract. However, the toolbox available to policy makers is not entirely empty. Mr Sinn argues that only a swiftly introduced Super-Kyoto system, combining all consuming countries into a seamless demand cartel using a world-wide cap-and-trade system, will help. This system should be supported by the levying of source taxes on capital income to spoil the resource owners’ appetite for financial assets. It is to be hoped that policymakers will read this book. They might then shed their illusions and support a climate policy that offers better chances of staving off disaster. Hans-Werner Sinn:
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Note: This text is the responsibility of the writer (Julio C. Saavedra) and does not necessarily reflect the opinion of either the person(s) cited or of the CESifo Group Munich. Copyright © CESifo GmbH 2004-2012. All rights reserved. |
