I was camping this past week with a friend of mine who is an economist. We were sitting around the campfire chatting about climate change (ironic, perhaps), and he said that he was concerned about the relationship between the costs of fossil fuels and amount we consume on a global scale. He said that there may actually be a situation where our reduction of CO2 could cause China and India to consume more of it. I was intrigued and asked why?
There is a direct connection between the amount of CO2 we emit and the amount of fuels we use. So, to cut our emissions, will essentially mean that we must reduce the amount of fuel we use. As we reduce our consumption, the law of supply and demand (Econ 101) comes into play. As demand drops, costs naturally drop. As costs drop, countries that are rapidly industrializing like China and India will use more fuels at cheaper prices. They would, then, offset any gains that we might make.A recent report from the Netherlands Environmental Assessment Agency found that the current economic downturn has caused the industrialized world (US, Canada, Europe, Japan, etc) to use less fuel and emit less CO2. But, these reduction have been “nullified” by increased use of fuels in the developing world (China and India). The good news is that 2009 was the first year that CO2 emissions were flat. The bad news is that they are still way too high and any gains that could have resulted from the bad economy were offset by the developing world.
This blog post, Global CO2 Trends Show Scope of Climate Challenge By Andrew C. Revkin, discusses the Dutch report. As an example, it compares China to France. These two countries have a fairly low CO2 output per person. France has a low CO2 output because it relies heavily on nuclear power. China has a low output because many of its people do not live in a world with electricity. Over the past 20 years, France’s output has dropped. During the same time, China’s output has grown like crazy. Soon, China will pass France, and, more than likely, it will pass every other country.
So, is there no hope? It seems that India and China are going to eat up more and more fuels and emit more and more CO2. It looks like the ship is sinking, so does it matter if we cut our emissions at all.
Well, if China and India are going to emit CO2 no matter what, we might as well cut our emissions. There is a history of innovation diffusion across economies, so investing in cleaner energy could be attractive to developing countries. Sharing our innovations helps everyone. It is good sign that according to the Dutch report one third of all new wind turbines was installed in China. There is also a connection between us and the developing world. There is evidence that agreements like the Kyoto Protocol helped to reduce emissions. Engaging China and India in these sorts of agreements may bare fruit.