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Why No One Wants to Pay for the Green Transition

4 points by Bostonian 3y ago

Bostonian 3y ago
https://archive.is/vcBIl https://archive.is/vcBIl 'Politicians and the public tend to think all investment is good for growth, an error that leads to all sorts of muddled thinking about climate. Technological transformations are positive supply shocks: a new, more efficient technology comes along, and investment naturally gravitates toward this new technology because it is profitable. By contrast, the green transition is driven by public policy. It is “a negative supply shock, with an accompanying need to finance investments whose profitability cannot be taken for granted,” French economist Jean Pisani-Ferry wrote in a report commissioned by the French prime minister and released in English in November. “By putting a price—financial or implicit—on a free resource (the climate), the transition increases production costs, with no guarantee that the reduction in energy costs will eventually offset them, while the investments it calls for do not increase productive capacity but must nevertheless be financed.” Pisani-Ferry, who is affiliated with the Bruegel think tank in Europe and the Peterson Institute for International Economics in Washington, is an uncommonly clear thinker on this issue. He notes the transition involves hefty capital spending today to replace fossil-fuel consumption in the future. Pisani-Ferry estimates a middle-class French family would spend 44% of annual disposable income for a heat pump, and 120% for an electric car. These investments boost demand, but don’t leave families better off since they simply do the same thing as what they replace. And if taxes rise to pay for these investments, families will be worse off, financially. “It would take an incredible act of blindness to fail to recognize that climate change is happening, that it is—and will increasingly become—severely damaging,” he writes. “It would also be incredibly flippant to claim that this urgent and imperative action will have no economic cost by 2030.”'

4 points by Bostonian 3y ago

https://archive.is/vcBIl https://archive.is/vcBIl 'Politicians and the public tend to think all investment is good for growth, an error that leads to all sorts of muddled thinking about climate. Technological transformations are positive supply shocks: a new, more efficient technology comes along, and investment naturally gravitates toward this new technology because it is profitable. By contrast, the green transition is driven by public policy. It is “a negative supply shock, with an accompanying need to finance investments whose profitability cannot be taken for granted,” French economist Jean Pisani-Ferry wrote in a report commissioned by the French prime minister and released in English in November. “By putting a price—financial or implicit—on a free resource (the climate), the transition increases production costs, with no guarantee that the reduction in energy costs will eventually offset them, while the investments it calls for do not increase productive capacity but must nevertheless be financed.” Pisani-Ferry, who is affiliated with the Bruegel think tank in Europe and the Peterson Institute for International Economics in Washington, is an uncommonly clear thinker on this issue. He notes the transition involves hefty capital spending today to replace fossil-fuel consumption in the future. Pisani-Ferry estimates a middle-class French family would spend 44% of annual disposable income for a heat pump, and 120% for an electric car. These investments boost demand, but don’t leave families better off since they simply do the same thing as what they replace. And if taxes rise to pay for these investments, families will be worse off, financially. “It would take an incredible act of blindness to fail to recognize that climate change is happening, that it is—and will increasingly become—severely damaging,” he writes. “It would also be incredibly flippant to claim that this urgent and imperative action will have no economic cost by 2030.”'