Home > Uncategorized > Austerity-obsessed Europe could combat climate change without raising taxes

Austerity-obsessed Europe could combat climate change without raising taxes

from Dean Baker

In the United States, there has been much attention given to the various proposals for a Green New Deal. While there have been legitimate questions about paying for a large push to reduce greenhouse gas emissions, many accept the need for such measures for the survival of the planet.

However, there has been less attention paid to the failure of European countries to act in this area, in spite of the fact that a substantial program would be virtually costless for Europe. There has been far more attention paid to the politics around Brexit in the United Kingdom than to the important question of how Europe will address global warming.

Just to be clear, the European countries have been far better global citizens in this area than the United States. Their per-person emissions are roughly half as much as the United States. Furthermore, many European countries have already taken aggressive measures to promote clean energy and encourage conservation.

But in the battle to slow global warming, simply doing better than the United States is not good enough. The European Union can and must do more to reduce its greenhouse gas emissions.

This is where the continent’s mindless push for austerity comes into the picture. European governments, led by Germany, have become obsessed with keeping deficits low and balancing budgets. Most have small deficits or even budget surpluses.

Germany exemplifies the European austerity obsession with a budget surplus that is close to 2.0 percent of GDP ($420 billion in the U.S. economy). To some extent, fiscal austerity is not a choice. The eurozone’s rules require low budget deficits for the countries that use the euro, but even countries outside the eurozone have joined the austerity party. The United Kingdom has a budget deficit of less than 1.5 percent of GDP, Denmark less than 0.5 percent of GDP, and Sweden has a budget surplus of close to 0.5 percent of GDP.

There are certainly circumstances under which budget deficits can be too high, but these clearly do not apply to the countries in the European Union at present. Inflation has been persistently low and has been falling in recent months. The inflation rate for the eurozone countries has averaged just 1.0 percent over the last 12 months.

The story is even more dramatic if we look at interest rates. The classic problem of a large budget deficit is that it leads to high interest rates that crowd out investment. Not only are interest rates extraordinarily low across Europe, in many countries, investors have to pay governments to lend them money.

The interest rate on a 10-year government bond in France is -0.43 percent. In the Netherlands, it is -0.57 percent, and in Germany it is -0.71 percent. That means investors have to pay Germany 0.71 percent annually to lend the government money.

This is the context in which the concern for low budget deficits in these countries is utterly mindless. The financial markets are effectively begging these governments to borrow more money, but they refuse to do so.

The need to address global warming makes this refusal especially painful. The fact that interest rates and inflation are so low indicates that these governments are needlessly sacrificing growth and jobs. That story is bad enough, but the picture is much worse when we consider the pressing need to address global warming.

These governments could either pay directly to install solar and wind power, or provide large subsidies to businesses and homeowners. They could be subsidizing the switch to electric cars and making mass transit cheap or free, while they vastly ramp up capacity. They could also be providing large subsidies to countries in the global South to take the same measures, and to also save the rainforest in the Amazon.

The best part of this story is that they don’t need to raise taxes to pay for this spending. There is considerable slack in these economies, which means that they can devote several hundred billion dollars annually to slow global warming without requiring additional taxes from their populations. It is possible that a really ambitious program, which might be needed, will require additional tax revenue, but for now, these countries are needlessly leaving money on the table while the planet burns.

It is common in policy circles to ridicule U.K. Prime Minister Boris Johnson for his seemingly mindless pursuit of Brexit. While Johnson surely deserves much ridicule, the proponents of austerity deserve a much larger dose. Keeping people out of work by failing to take more aggressive steps to address global warming is far more clownish than anything that Boris Johnson is doing with Brexit.

See article on original site

  1. Frank Salter
    September 4, 2019 at 10:09 am

    There seems to be complete blindness to the fact that renewable resources are too small and intermittent to solve the problem with carbon dioxide and the other absorbing gases which are being released. If we are not to reduce our standards of living and not to prevent the less industrialised economies developing then we must embrace nuclear power generation. The present uranium based systems have many problems including allowing nuclear weapons. The best solution is to develop thorium reactors as they will be much safer and there are centuries of fuel available. But it is necessary for governments to finance the research and development. The sooner this is understood the sooner we will be able to reverse some of the changes which have taken place.

    • Ken Zimmerman
      September 4, 2019 at 12:31 pm

      Frank, dead wrong. Globally, total renewable electric generation capacity reached 2,351 GW at the end of last year – around a third of total installed electricity capacity. Hydropower accounts for the largest share with an installed capacity of 1 172 GW – around half of the total. The remainder is solar and wind. With improvements in batteries, larger wind turbines, and solar sites growing to thousands of acres, wind, solar, and hydro will be over half of installed capacity in 5-8 years. Once the coal plants are all retired and gas plants reduced to minimum, by 2030 about 80% of world installed capacity will be renewable. Intermittency issues have mostly been solved. And actual operational data shows renewable plants more reliable than fossil fuel plants.

      As to thorium reactors, I’ve seen the ads and looked at the designs. It all seems workable and plausible. But so did cold fusion, for a time. Either of these technologies, if proven could help provide the world’s energy needs. But I’m an historian. One of the areas of my research is humans’ creation and use of energy. The ads and engineering studies from the outset claimed fossil-based energy was clean, safe, and abundant. All of which turned out to be false. As they say, once bitten, twice shy. I understand fusion thoroughly, but am waiting for the proof it can be achieved at room temperature. I understand thorium reactors, but I want more practical field studies before I accept any one or several reactor designs as clean and safe.

      • Frank Salter
        September 4, 2019 at 2:58 pm

        I am not wrong. I will assume that you figures on current electrical and installed capacity are correct. However you are failing to consider is that to reduce carbon dioxide emissions, all transport and heating requirements will have to replaced by electricity. Then the increased use of electricity be developing nations will have to be met from electrical generation. That changes the position you set out completely. I believe that more that an order of magnitude increase in generation will be required.

      • Ken Zimmerman
        September 5, 2019 at 12:44 am

        Frank, I don’t believe there is an issue with increasing electric generation by even more than an order of magnitude over that of today using renewable resources. Assuming political opposition (linked of course to profits from non-renewable generation and the sharing of profits from renewable generation) can be overcome. And assuming no cataclysmic economic, environmental, or political upheaval shuts down or even destroys most world societies. The engineering problems are significant, but not overwhelming.

      • Frank Salter
        September 4, 2019 at 3:17 pm

        Scientists did not believe in cold fusion. As the efficiency of a practical heat engine is less that (Th -Tc)/Th, where Th is the absolute temperature of the hot working fluid and Tc is the absolute temperature of the cold working fluid. Hardly useful even if cold fusion did occur,

        The use of uranium reactors was developed to make nuclear weapons. The use of thorium does not provide fissionable material. I did say thorium reactors needed further research and development. This needs to be provided by by state sponsored research to provide safe workable designs.

      • Ken Zimmerman
        September 5, 2019 at 12:58 am

        Frank, I agree that currently there is no accepted theoretical model that would allow cold fusion to occur. But that could change.

        A breeder reactor generates more fissile material than it consumes because its neutron economy is high enough to create more fissile fuel than it uses by irradiation of a fertile material, such as uranium-238 or thorium-232 that is loaded into the reactor along with fissile fuel. Under current theories thorium-fueled breeder reactors are possible. Though none has been constructed. As to government sponsorship of research on Thorium reactors, I agree.

      • Michal
        September 5, 2019 at 5:31 pm

        Ken, there’s a huge difference between the capacity of renewables and the energy they actually generate. This capacity doesn’t mean much when generation is intermittent – unlike nuclear, renewables might be operating well below their capacity for much of the time and require additional sources to make up for that.

      • Ken Zimmerman
        September 5, 2019 at 10:29 pm

        Michal, managing an electric grid involves management of different resources’ capacity factors over the year. On a conventional grid coal generation operates annually near 70% or higher of the year’s hours. But the side effects of burning coal are literally lethal. And coal ash is just as deadly unless stored carefully and properly. Just the mercury emitted by burning coal is a reason not to use it. Natural gas combined-cycle generation plants operate between 50% and 30% of the hours of a year. Natural gas emissions are much lower than coal, but raw methane is 3-5 times more potent as a green house gas than CO2. A very good reason to side line natural gas. Hydro’s capacity factor is between 30% and 50% but is often unavailable during dryer months. Wind generation is available between 20% and 30% of the hours of the year, but has no pollution or CO2 footprint. Solar’s capacity factor is about 25% during the year. Add battery storage and each of these renewable capacity factors is at least doubled. That makes renewable energy generation comparable to coal and natural gas. Solar, wind, and hydro are already the least expensive of all the options. Add in the savings from pollution and CO2 abatement and renewable energy cost is less than half of fossil-fueled options. Nuclear generation is uncertain. Current plants create too much waste to be an effective large-scale option. Perhaps new plant designs or fuels can alleviate this problem. We’re smart enough to know that burning fossil fuels is killing us. Are we smart enough to do something about it? Nuclear, the same. Only it’s right now killing us more slowly.

  2. Ken Zimmerman
    September 5, 2019 at 2:29 am

    Imagine you are the CEO of a large company. You’re rich, pal around with all the right and politically powerful folks, and you’re a drunk and pedophile. You have some trouble from the last two. But then the police instead of arresting you and bringing you to trial for your crimes, arrest your gardener. Your gardener, John is tried, convicted, and sentenced to 25 years imprisonment for pedophilia and killing a child while drunk. John is confused since he did none of these things. But the judge says it’s out of her hands. She must punish John to the full extent of the law to send a moral message to the community that such actions are not acceptable, ever. So, John loses his freedom, CEO takes a vacation to Brazil to get over his sadness about John, and the moral consequences of pedophilia and drunkenness have been demonstrated for the community. In a nutshell. this is austerity.

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