climate change growth

Can we grow the economy and stop climate change?

Over the last couple of weeks I’ve been debating with a reader named Rav Casley Gera, who disagrees with me about economic growth. He’s challenged me to read a McKinsey report called The Carbon Productivity Challenge: Curbing climate change and sustaining economic growth. In return, Rav is going to read Tim Jackson’s book Prosperity Without Growth. My homework was a little shorter than Rav’s, so I’m ready to report back.

The essence of McKinsey’s report is that it is entirely possible to grow the economy while reducing our CO2 emissions, if we pursue a radical programme of energy efficiency. Rather than reducing activity, we need to work on ‘carbon productivity’ – the amount of carbon produced for each unit of economic growth.

Writing in 2008, McKinsey calculates that the economy gets $740 of GDP for each tonne of CO2 equivalent. In order to keep the carbon content of the atmosphere below 500 parts per million, that ratio of dollars to carbon would have to increase tenfold by 2050. “This is comparable in magnitude to the labour productivity increases of the Industrial Revolution,” they admit, only carried out in a third of the time.

It’s a formidable challenge, but not impossible. They outline five key strategies to achieve carbon stability:

  1. Increase energy efficiency
  2. Decarbonize energy sources
  3. Accelerate the development of low-carbon technologies.
  4. Change behaviour of business and consumers
  5. Protect forests and other carbon sinks

Along the way they mention removing perverse subsidies for fossil fuels, pricing carbon into consumer goods, efficiency standards for vehicles, and transferring technologies to developing countries. Even inequality gets a mention towards the end. I agree with all of their strategies, and I agree with them that it’s achievable by their calculations, however difficult it may be. I’m prepared to accept nuclear power and carbon capture and storage. However, they have not gone far enough.

McKinsey have gone for 500ppm as their baseline, taking their cues from Nicholas Stern. Unfortunately Stern has changed his position since he wrote the book and now believes that 350ppm is a better target. Many climate scientists now advocate the lower number, and policy makers and economists need to catch up. If 350ppm (we’re currently at 392) is the realistic target, then even a project as transformative as the Industrial Revolution is still woefully inadequate.

“Without a major boost in carbon productivity,” say the authors, “stabilising GHG emissions would require a major drop in lifestyle for developed countries.” Indeed, but if they have overestimated the baseline, then we need to pursue all of their strategies and accept that major drop in lifestyle as well. That’s my own position – pursue every possible new technology, drive efficiency as far as it can go, and scale back our hypermobile, hyperconsuming lifestyles too. If McKinsey were to recalculate for 350ppm, they might find themselves agreeing.

There’s another problem. McKinsey have addressed climate change as if it’s the only crisis of the 21st century. Writing in 2008, they should have been able to see a debt problem coming. Instead, the report contains statements that don’t seem quite so optimistic today: “The EU and other parts of the developed world would likely find it possible to finance their incremental investment through borrowing.” Perhaps we could pull off a second industrial revolution in 40 years – human ingenuity is a remarkable thing. But can we do it with a full-blown debt crisis as well?

Similarly, McKinsey have ignored the problem of resource depletion. There’s a painful line in the report in which they calculate the return on energy investments “assuming an average oil price during the period of $50 a barrel”. That’s just bizarre – even if you’re completely unaware of peak oil, why would you assume that the price of an essential commodity would remain unchanged for 40 years? It’s the only mention of the price of oil, but the end of cheap energy has serious consequences for the economy and our ability to react to climate change and it deserves attention.

There’s no mention of population either, and the role that demographics has in climate change – another major factor that seems to be missing from the equation. So again, the report has plenty of sensible ideas and is and well argued, it just doesn’t recognise the magnitude of the challenge. “The world can abate carbon and continue to grow” the report maintains, but it fundamentally underestimates the scale of the problem and the exacerbating factors of resource depletion and population growth. It also shows how much things have changed since 2008, which is no fault of McKinsey’s. We really are living in a time of radical change.

The other thing to bear in mind is that McKinsey are, presumably, not suggesting that growth stops in 2050. But that means that, having just completed an unprecedented transformation of the industrial economy, we now need to do it again if growth is to continue until 2100. Only this time the curve will be steeper and the odds higher, because growth is exponential. How many times can we do that? And how long do we need to stretch every sinew to protect this precious growth, before we actually start asking what we wanted the growth for in the first place?


  1. I agree for the most part. I’ve not read this report but I’ve read others in researching the book. Despite what Chris Goodell has found I’m not convinced that limitless growth is possible on a finite planet. Logically its not possible. Making your processes more efficient will only get you so far since it takes not account of resource depletion. The problem is no one has the nerve to say this and in a way I cannot blame them. I personally cannot accept nuclear power or CC.

    1. CCS is still unproven. If it works it would be a godsend, but we have to proceed as if it won’t. As for nuclear, I have huge reservations and it’s dependent on a finite resource, but I can live with it as a transition energy source while we decarbonise the rest of our energy system.

      There are lots of competing theories on whether or not we can accomodate further growth. I suspect this will need to become a series.

  2. How long before we realise that each ‘progressive’ growth finally results in larger problems and smaller options. This growing bubble will burst in a mess I’d rather not see. No one, as Neil says, has the nerve to say it, because we’re all part of this bubble.

    And Jeremy, you ask, yet again, how long ‘before we actually start asking what WE wanted the growth for in the first place?’ Forgive me Jeremy, but to ask this, is to investigate the nature of human weaknesses! (Did I hear you groan?). We need this like nothing else, if we are to hope for something better – real growth. (Are you sure that you do not want to change your platform and sing from a different sheet, or even keep it in mind?). The politics and economics that we know, are chasing rainbows. If we cared first for the environment and wildlife (the creation that we find ourselves in), instead of trying to change it for our luxuries, we may stand a chance for hope for one another (the 2nd commandment, did you see the 1st?), otherwise……..?, (perhaps I’ll join the stoics). Meanwhile, I suppose it’s back to the nuclear energy and growth of another kind.

  3. Thank you for the very in depth and informative blog post. However, I noticed you fail to mention how the Carbon Tax plays a role in the future of our economy. I’d like to know what your thoughts are on the recently implemented tax in regards to our economy. Many skeptics claim it will stifle our economy. Do you agree? Our blog CarbonTaxMyth discusses how the carbon tax is affecting individuals and inevitably the cost of carbon tax will be passed down the average Australian via increase in food, transport and electricity bills.

    1. Yes, I haven’t gone into any great detail as this is a specific response to the McKinsey paper, which only really makes passing mention of taxing carbon. I’m supportive of carbon taxes in theory, but you have to design them properly. Like financial transaction taxes, a bad one could be destructive and politically toxic without actually achieving anything. Australia is an interesting case study, and I think a lot of people are watching it to see how it turns out.

      On the specific question of whether or not the tax will stifle the economy, that seems somewhat alarmist to me. It’s not a particularly heavy tax, it only applies to the biggest companies, and the trickledown effect to ordinary households will be fairly modest. In a country which has one of the biggest carbon footprints in the world, it seems pretty reasonable to me. But from the tone of your website, I gather we wouldn’t find much common ground on the matter.

  4. Hi Jeremy,

    Thanks for your excellent well argued blog. I want to, however, issue you with a challenge. It is my firm conviction that most steady-state and de-growth advocates have not yet fully faced up to the full implications of what they are advocating. I know I will be accused of being an antiquated cold-war commie ideologue etc, but I think we have to think in terms of a reconceived eco-socialism (emphasis on reconceived). Here is a link to a paper which, I believe, accurately spells out the anavoidable implications of a zero-growth economy. I would be interested in your response, critical or otherwise.

    I also reccomend checking out the work of eco-socialist Saral Sarkar (his latest book is online -google)


    1. I’ve read Trainer’s report and I agree that growth is integral to the system, and that undoing growth has wide reaching consequences. I disagree with him on some of his assumptions. For example, he correctly suggests that we can’t have an interest-charging banking system, as that creates a growth imperative to pay back our debts. He says that we’ll need a money system where money is lent with no profit to the lender, but that doesn’t follow. There are plenty of profit-sharing or fee systems that would enable banking to be profitable without relying on interest. It wouldn’t be as lucrative as interest, but we’ve had banking without usury in the past, so it must be possible to do it again. Islamic Finance has some lessons we could learn here.

      Likewise, Trainer suggests there’s no role for the market, since business is currently all about maximising profits and market share. I don’t think that’s true either – maximising is the logic of shareholder corporations, not markets per se. There are plenty of businesses that are content with their niche and harbour no ambitions to take over the world. It should be possible to use market forces and competition without the winner-takes-all inevitability of our current system, if we move towards a more co-operative economy, prioritising social enterprise and small businesses. Co-operatives already hire more people than corporations, and the rise of B-Corporations, collaborative consumption and Not for profits are all encouraging signs of alternatives.

      I don’t think a centrally-planned socialist model is inevitable. I might be wrong, but I think there are good ideas all over the place that add up to something quite different. And I think it will have to be something new – very few people would sign up to a socialist future, and if postgrowth advocates tie themselves too closely to socialism they are likely to remain forever in the corner.

      This is something I need to investigate further though, so I’ll check out Saral Sarkar.

    2. It is interesting. When I was young socialism was necessary to replace capitalism because socialism would grow the economy faster. Then the socialist model was shown to be less productive that market capitalism so suddenly we needed to stop growth and only socialism can do that. Fool me once shame on you……

        1. Khrushchev 1959 “In 7 years we will reach the level of America. When we catch up and pass you by, we’ll wave to you.”

          Much of the support Socialism/Communism gained in the 1920s and 1930s came from the view that rational economic planning would advance the economy quicker than haphazard capitalism with its business cycles. The apparent rapid growth of the USSR compared to Europe in this time of depression was a big factor in the support it gots from many Western intellectuals.

          Now if you say, that’s ‘Communism, Socialism is something different’ then the 1945 Labour government justified its nationalisations and state planning as being a better, more reliable and quicker way to grow the wealth of the nation.

          The relative failure of state planning in advanced economies became obvious from the 1970s onwards and so almost all literature in favour of socialism now has moved the pitch to equality or greenery though given the huge damage the Soviet system did to the environment its a wonder they aren’t laughed out of court on that last point.

          1. The Krushev example is Communist propaganda – Marx and Engels didn’t formulate Communism as a way of growing the economy, but a way of moving capital out of private hands. It’s a completely different agenda.

            Your second example is post war reconstruction, at a time when half the country was centrally planned already anyway – right down to how many types of cheese could be sold. The country was bankrupt and broken, and taking the bank of England and the railways into public hands allowed them to be rebuilt. It made sense at the time in ways that it wouldn’t now.

            Socialist politics reached a deadlock in the 1970s and something had to be done. In some countries it was abandoned in favour of the Thatcher/Reagan model. Other places managed a different compromise and ended up with the social democracy tradition of Northern Europe which seems to work pretty well.

            In my opinion socialism belongs in the 20th century, alongside neoliberal economics – both are inadequate ideologies for the 21st century. But there are things we can learn from both as we try to shape a vision for the future.

          2. Why did Marx and Engels want move capital out of private hands? So it would be more efficiently run to the benefit of all. That included greater production that capitalism. While Krushchev was crowing, the Soviet Union did believe its system would ultimately provide a higher material standard of living that the West, hence all the focus on production statistics.

            State planning wasn’t just a post war emergency measure. Attlee and co really believed it was better at growing the economy as well as sharing wealth. They advocated it before the war.

            As to to Northern European social democracy, after the near death experiences in the late 80s/early 90s of the Nordic economies they are now open liberal market economies. They use the proceeds to fund the strong welfare state. Hence all the privately run state schools in Sweden and fire stations in Denmark.

            Not sure what we can learn for socialism, other than what not to do.

  5. Marx wasn’t concerned with efficiency, but emancipation. His was a people-first philosophy, not production first. I think you have a rather skewed definition of Communism.

    I’ll give you an example of a socialist idea that is now so mainstream that nobody calls it socialist – employee ownership. We have a Conservative government that loves the idea of cooperatives and a ‘John Lewis economy’. George Osborne just announced a plan to extend employee ownership through shares.

    That’s the kind of thing I’m talking about, when good and practical ideas can be taken on their own merits, without the deadweight of ideology or the need to pick one entire philosophy to the exclusion of all others.

    1. I think you aren’t looking at the ideas of Communism/socialism as a whole. You said you never heard an argument for socialism based on faster economic growth, I provided you with several real world examples. So now you have. Theory is fine but look at practice. In the 20th Century much of the appeal of communism and socialism was the promise not just of emancipation, but of a higher material standard of living. The USSR was constantly boasting of number of homes built, amount of electricity generated, tractors made etc. Half the headlines on Radio Moscow were about this when I listened in the 1980s.

      Now the odd idea from the broadly socialist tradition is worthwhile, cooperatives are a fine way of motivating staff. But we should not ignore the fact that where ever it has been tried communism or socialism has either been a total disaster (USSR, Cuba etc) or failed to endure (Nordic social economies are now very free market). What works, what endures has to be an important factor. Marx stole Hegel’s idea of dialectic history. If we look clearly then we see socialism has joined feudalism in the dust bin of ideas who’s time has passed.

      1. You’re right, I’m sure it was all over the propaganda. I’m thinking of the actual theory, but the practice probably came out different.

        And I agree entirely that socialism is not a direction we should be taking. I’m just interested in the best ideas, combined with the best ideas from elsewhere, and something entirely different emerging from them.

  6. Hi Jeremy,

    Thanks for responding to my challenge, and sorry for late reply. I actually emailed your response to Ted, and here was his quick reply:

    ‘I certainly didn’t mean that in a zero growth economy there could be no profit from lending, but I do meant here can be no interest payment. The “profit” would just be the fee paid to the lending agency, town bank, for the work done in organising the loan. It would be just another fee for service, one which does not increase the amount of money in circulation. But when there is interest paid the amount of money in circulation must increase over time…which is not possible if there is to be no growth.

    I think he is quite mistaken re the market but don’t have the time to spell this out fully. He is talking about a market situation in which people do not really play by market principles. In a market you maximise benefits and minimise costs. Yes some people don’t do this when they go to buy and sell, but they are not playing according to the rules, and they will probably get disadvantaged and bankrupted if they go on like that. If he is saying he wants people to exchange without competitive maximising, then why not scrap the market and organise exchange in terms of the principles these non-players are following…including, done maximise if it will ruin a competitor, done’ buy the cheapest if there is some struggling little bloke who charges more but needs the sale…It is easy to confuse market principles with a market place. We can always have places here wee exchange, but they need have nothing to do with market principles or market forces. In a family we exchange, invest (time and tomatoes) but not according to marked principles/ forces

    Final point, who said anything about a centrally planned socialist model? We are for a) a mostly planned anarchist model, with the important town decisions made by all of us at the town meetings, and b) some wider issues dealt with by more central agencies that are controlled by us down at town level, via confederations and delegations, not state bureaucrats. Yes agree entirely if post-growth advocates identify themselves with the state-planning image we will not get followers.’

    I think its important to add to what Ted has said here. The Simpler Way vision which he outlines – which personally I find inspiring – talks about a new economy with multiple sectors. It would a) a large cashless sector, which involved household self-sufficiency, gifting, sharing, food from the commons etc b) a market sector which allowed people to run their own small businesses…but within certain tight restrictions governed by US c) a co-operative/working bee sector where people got together to provide goods and services for the town i.e aged care, childcare, entertainment etc d) a democratically planned sector for the (few) large scale industries

    Cheers, keep up the good work.

    1. Interesting, thanks for running that past Ted. I actually agree with him that anarchism is closer to what we need than socialism. My comment about socialism was more in response to your comment than his paper. I think part of the problem is that big government socialism is the only kind we’ve had. Nobody has tried a decentralised version of it yet.

      It’s a useful clarification on money and profit, as the paper does suggest that banking will have to be done “without increasing the wealth of the lender”. I’d read that as profit-less, but he obviously means without interest.

      On the markets, I see the distinction between market principles and market places, but I’m not convinced that there is no room for market principles. A little competition is healthy, and market forces of supply and demand are a useful way of collectively making those decisions about what to produce. What’s missing in my opinion is economic democracy, and we can go some way to fixing that through the alternative business structures I mentioned earlier, amongst other things. That may not be capitalism for all I know. Capitalism seems to be a pretty narrow concept when you get the bottom of it.

      I like the simpler way vision. It appeals to me, but I find it difficult to reconcile to the realities I see around me. There are elements that can totally work, like co-production of services and the cashless sector, both of which are growing already. What I find more awkward is the urban dimension.The world is now more urban than rural, and the idea of household self-sufficiency in a place like Sao Paulo or Guangzhou just seems a million miles away.

    2. “Planned anarchist” isn’t that an oxymoron?

      Also why can’t there be interest in a zero growth economy? The Time value of money suggests that interest will still be a valid and sensible idea. If I lend you £100 now, that is £100 I don’t have to spend today, I can only spend it when you repay it and I’m bearing a risk that I’ll need that money before you repay it. Hence I need a payment in respect of the present utility foregone and risk taken. Now I could charge a lending fee equal to what the interest would be but that is just a change of terminology, not a change to the underlying economics of the transaction. Interest has survived for so long because it works, it gives the lender a secure revenue flow and the borrower has a regular number of fixed small payments to make, not a large upfront/end cost.

      Interest would work in a zero growth economy economically. Say the local blacksmith wants to retire. He wants to sell, to realise the capital from what he has built up. I want to buy his business but I don’t have the capital to buy it outright. So I take out a loan against my future earnings.Being a zero growth economy my business doesn’t expand but from my cashflow I can make regular interest and capital payments.

      ” the amount of money in circulation must increase over time…which is not possible if there is to be no growth.” Have you never heard of inflation?

  7. ‘planned anarchism’ does sound pretty awkward, but there are plenty of models of collectivist anarchism or mutualism that are closer to what we’re talking about – but this is why I hesitate to name-check older political ideas. We’re in new territory, and the baggage that comes with our political ideas keeps getting in the way.

    Interest is a problem because of the way money is created. Banks create the money that they lend into the economy, so it isn’t a matter of lending an existing £100 and then not having it to spend. It’s new money, and if the banks want it to come back to them with interest, the economy has to be growing.

    (This isn’t about fair compensation for risk, by the way. If you buy a house you might pay for it twice over through interest payments, but the bank keeps the deeds throughout – so they don’t bear the risk. The bank wins whether the buyer repays the loan or not. All the risk is with the buyer.)

    1. The risk to a bank with property lending is two fold; firstly a liquidity crunch (a run on the bank) as banks have short term liabilities (cash deposits can be withdrawn within days) matched to long term assets (mortgages are over 25 years and it takes months to sell a house). Hence they bear a risk in lending you money that those they borrowed the money off (depositors) will want it back pronto. Secondly the value of assets can fall so if the borrower defaults the bank may not get back the sum they lent. These two come together in liquidity crises because the banks have to sell lots of assets quickly which depresses the prices.

      If property lending was risk free Northern Rock would still be with us and the great crash of 2008 wouldn’t have happened.

      1. Yes, but bank runs are a tiny risk and hardly justify the enormous profits made through interest. It was 150 years between Northern Rock and the last one.

        Northern Rock also had a dubious business model, getting round the reserves issue by borrowing vast quantities on the money markets, lending it out as mortgages, and then selling those mortgages on to finance more debt. It was always going to fail as soon as the market cooled.

    2. I think you are being a bit loose with your terms. Interest isn’t your problem, neither is the existence of banks. Your problem is with fractional reserve banking where banks only have to keep part of their of their existing assets as reserves while they can loan against the whole of their assets. That is your problem as that can increase the money supply.

      In a steady state economy there would still be a role for banks, just they would be smaller as there would be fewer opportunities for productive investment. I’m assuming you have no problem with mutual building societies, credit unions and cooperative banks or microfinance. All of those exist on interest and do a great deal of good. Even in a steady state economy we would want somewhere safe to keep our savings. Without interest (or something so similar as to make no odds) we have no safe place for our savings.

      Fortunately as a people we have got past the Bible’s proscription of ursary. Islamic finance has been created principally to achieve the results of interest while avoiding the murderous retribution of backwards practitioners of that faith.

      1. I do have a problem with fractional reserve banking, but that’s not the issue here. Bank interest is compound interest, which grows exponentially. That’s why house buyers end up paying for their house twice over the life of a mortgage (indefensible in itself, quite frankly). When you scale that up and throw in business and government too, you have an entire economy that needs constant growth of the money supply in order to repay the interest on the loans.

        It’s entirely possible to create money and run banking profitably without interest, or with very low interest. It would also be fairer and less exploitative.

        You can have savings that increase in value in a value that doesn’t charge interest on its loans – it accumulates through profit-sharing.

        1. Profit sharing is akin to equity; no profit = no money. It is riskier for the owner of the savings than a deposit account. You don’t want to encourage economic growth yet wish to force a banking model that is even more reliant on growth for profits to share. It is also less certain for the borrower as if they make higher profits, they have to give the lender more money, whilst interest is clear and known.

          You think it is unfair that house buyers pay twice the value of the house over the life of a mortgage. Yet you brush off the risk the lender takes. It is easy to see banks as giant impersonal organisations but at heart they are millions of individuals. So lets suggest this is peer to peer lending. You want me to lend you 3 times my annual salary and not see that money for 25 years. I save 10% of my salary so that capital took me 30 years to put aside. How much is fair for me to ask for 55 years of self denial in not being able to spend that money, and the risk I might lose some or all of that money? 5% per year is hardly massive sum when inflation is factored in. It is the length of time of the mortgage that creates the total cost. The actual cost is small affordable payments. What profit share is there in housing unless it is capital growth, which I assume you would also expect to cease in a steady state economy. Mortgage interest is a replacement for rent. You rent for 25 years you could easily pay the value of the house two times and have no asset at the end of it. Lenders will not lend unless they get a reasonable return in compensation for their risks and opportunity cost. Money in the future has a lower value than money now, money I lend to you now I can’t spend today, I have to wait. If that means I can’t heat my house then I might freeze to death before I get my money back.

          We now have peer to peer lending and its rates are comparable to the banks. Given the competitive market that suggests that is what being charged is what the lenders think is fair, and that since borrowers are borrowing, what they think is fair too. If you don’t then you don’t have to have a mortgage.

          Interest on loans is paid out of cashflow. In a fully backed banking system where deposits and loans are exactly matched there would be no need to the money supply to grow. Compound interest on deposits is consumption deferred by the depositor. They will consume it eventually.

          Northern Rock was not the only property lending bank to go down. HBOS was principally a retail bank. As was Bradford and Bingley and even mutuals weren’t spared. Dunfermline BS went too. You can assert then is little or no risk in banking but unless it is your money you are risking, I don’t think you can make that call.

          1. Considering banks get to create money for free and pay nothing for that privilege, I think the current interest-based system compensates them several times over for the risk they take. They have enormous privileges that they have in many ways abused – the securitization process and derivatives trading was an abuse of trust. The mortgage holders at the end of the line had no idea what the banks were up to. Even the banks hardly knew what they were doing it seems.

            I’m not suggesting some big magic solution here, I’m interested in a more diverse banking system that’s fit for purpose. It makes sense that government money should be created without interest, rather than borrowed at interest. Equity approaches are more suited to business.

            I’m not an absolutist about interest – peer to peer is one of those areas where it works well, because it actually does reward the risk taken. Peer lenders can’t hold security and actually have real savings behind the loan.

            I also think the next century will see huge innovation in money itself, with an ecology of currencies used for different things. (I was at the pub yesterday with someone who is developing an online bartercard)

            But, I’ll be honest – I don’t see the solutions in banking and finance. I can see a whole pile of problems, and some serious obstacles to creating a sustainable economy. How we work around those things, I don’t know. If you’re arguing that our current banking system is working well, I think you’re wrong, but I don’t want to claim to have to have an alternative model all worked out.

          2. I’ll admit I’m baffled by your dislike of compound interest. Mortgage holders don’t really pay compound interest, unless they take a payment holiday the principal declines over time. And savers having compound interest isn’t a problem, they are in effect loaning more and more money to the bank. There is no effective difference between someone letting their interest compound and someone on a profit share reinvesting their profits in that business. the effect is the same. It is easy to make silly projections of compound interest that it will exponentially take over all money in the world but that does not happen. The money that pays the interest is either from productive investment, or eventually the bank will go bust and default.

            Peer to peer lending is in effect security backed. I lend you £250,000 to buy a house, you don’t repay. I’ll have you bankrupted and your trustee in bankruptcy will sell your house to repay me.

            It seems to me that you should look at Hayek and the Austrian school. They disliked fractional banking as it expanded money supply. They were for sound money and balanced government budgets which a steady state economy needs.

  8. Peer to peer lending negotiated that way might be security backed, if there’s a private contract drawn up (that’s how I’ve bought my house). The growing sector of online peer to peer networks solve the risk problem by lending small amounts from lots of lenders, so any losses are spread out. The interest returned on other loans in your portfolio should make up the difference.

    It’s national debt that’s the biggest headache for a sustainable economy – when the economy slows and the tax take falls, interest repayment becomes an ever larger slice of government expenditure. At the same time, the cost of borrowing goes up as investors demand higher interest on new loans, and you end up with a vicious circle that’s very hard to break, as Greece is discovering. We need large scale investment to decarbonise the economy, but if that funding is interest bearing, it ties it into a growth paradigm that we may not be able to deliver on.

    On mortgages, we’re prepared to accept the high costs of buying a house because the value of the house is likely to increase in the interim. If the housing market is more stable and house prices aren’t on a constant rise, that kind of mortgage begins to look like very poor value. Pressure on house prices would ease in a lower growth economy, and that’s going to need some innovation in the housing market. Actually that’s happening already – the credit crunch has forced people to look at new ways to buy houses, and new funding options from the financial sector in turn – things like the Castle Trust for example.

    As I say, I’m trying to work this out. It’s a formidable tangle of cause and effect.

  9. Jeremy! So sorry I missed your response to our deal when you first wrote it. You make a very robust argument, and you may well be right that 350ppm is impossible without a slow-down in rich country growth. The question, I think, is about 350ppm as a target. It seemed to have ‘a moment’ a few years ago, but right now with so little prospect on the cards of a move towards 450 (or 550, for that matter!) it just feels like that ship has sailed and we’re in damage-limitation mode. From Stern’s 350 ‘endorsement’ it seems lik he’s looking at it as a goal for 2100 or thereabouts.

    What’s the latest thinking on the specific question of whether maxing out at 450ppm by mid-century – or, more likely, going up to 500ppm by mid-century then getting back down to 450ppm by 2070 or so – will keep the chances of more than 2C change below 50%?

    I’m going to read Prosperity Without Growth, I promise. I have it on my Kindle.

    1. No worries. I think a lot of it comes down to the 350 ppm thing. To a scientist, it’s non-negotiable. Others want to know what’s ‘politically possible’ and that means compromise. The problem is that if the 350 folks are right, we might as well do nothing as shoot for 450, because once the feedback mechanisms kick in we’d be unable to stop 2 degrees becoming 3, 4 and so on.

      As I understand it, we have a pretty tight frame for delivering carbon reductions. I know emissions are supposed to peak by 2015 and start declining after that if we have a chance of keeping below 2 degrees. We crossed the 400 ppm boundary this year and that’s as far as we ought to go in my opinion. Obviously nobody knows exactly what will happen, so it’s all about risk in the end. Are we prepared to take a 50/50 bet on a liveable environment?

  10. I was curious if youu ever thought of changing the page layout of your website?
    Its very wwell written; I love what youve got to say. Buut maybe you
    could a little more inn the way of content so peope
    could connect with it better. Youve got ann awful lot of text for oonly having 1 or 2 pictures.
    Maybe you could space it out better?

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