Yesterday, I took the “Huffington-Post-Left” to task for urging a contradictory policy program upon President Obama and the Democrats. These worldly liberals propose that we revive robust economic growth and take action to prevent climate change. From what I can tell, these are mutually exclusive goals.

Today, I will try to justify these assertions by examining a December 2009 report by University of Michigan assistant research scientist Jose A. Tapia Granados, “Dispelling the Smoke: CO2 Emissions and Economic Growth from a Global Perspective.”

Granados examined the data on carbon emissions world-wide over the past century. His aim is to test the validity of something called the Environmental Kuznets Curve.

The Kuznets Curve is a theory about pollution and industrial development. It holds that economic growth in developed, service sector-based, post-industrial economies (such as Western Europe and the United States) is less polluting than it is in developing countries (China, Brazil, India). When the U.S. was developing during the Gilded Age, it polluted a whole lot. Now it is developed, and therefore, America’s economic growth must pollute less than it did during earlier stages of development.

The Kuznets Curve looks like a simple hill. Pollution per unit of economic production goes up until the middle, and then declines permanently.

In 1992, a famous conservative economist named Douglas Holtz-Eakin sought to demonstrate that carbon dioxide emissions—the primary cause of global warming—follow the law of the Kuznets Curve. Six years later, other economists wrote that United States’ carbon emissions per primary unit of energy consumed had peaked in 1973, and would continue to decline through 2050. If the carbon emissions application of the Kuznets theory is correct, it potentially means that the U.S. could keep growing forever (assuming there were enough resources to do so), without contributing unduly to global warming.

Granados argues that this theory is definitively false. The data shows that the historical pattern of carbon emissions for developed countries resembles an “N”-shape. Up, down, then, way back up. Not up, up, up, and then down forever, as the Kuznets Curve would have it. This would imply that developed countries are contributing just as much per unit of energy consumed to global warming as developing countries, and therefore, cannot keep growing indefinitely.

Why? Because carbon emissions are strongly correlated with economic growth throughout the 20^th century. Every time there is a worldwide recession, or a recession in an individual country, the data shows that carbon emissions drop. When there is strong economic growth, carbon emissions rise exponentially.

Take the United States, which is generally a good indicator of world economic activity:

Considering the special case of the US economy, its annual rate of growth and the rate of growth of US emissions of CO2 follow each other very closely. Emissions dropped strongly in the recession of the early 1920s, but they dropped much more lastingly and deeply during the Great Depression in the early 1930s, and again in 1938, in the so-called Roosevelt recession, and again in the recessions of 1949, the mid 1970s, and the early 1980s.

There were three periods in 20^th century America in which there was a negative or weak correlation between carbon emissions and economic growth: The 1910s, 1940s, and 1990s. The first two had to do-with World-War-time fuel rationing leading to decreased car sales, Granados postulates. There was a weak correlation in the 1990s because there were both high carbon emissions during the 1990 recession and low carbon emissions during the high-growth year of 1997, due to an oil price spike. This weakened the overall correlation. But carbon emissions grew at an annual rate of 1.8% in the 90’s, as opposed to .9% in the 80’s, and .6% in the 70’s.

Using carbon emissions data from 1950 onward, Granados examined the 48 nations with 20 million-plus populations in 2000, and found the exact same trend. Rising emissions during periods of growth; falling emissions during recession. In 2009, world emissions fell 1.4%. The following year, as economic growth returned, emissions grew by 5.9%.

In summary, historical evidence strongly suggests that drops in emissions have occurred in periods in which economic activities shrank, as occurred in the West in the 1930s and the 1980s and in the East in the 1990s. It shows that in periods of accelerated global economic growth like the 1950s and the 1960s, both total and per capita CO2 emissions strongly increased.

World Carbon Dioxide Emissions and Economic Growth. Courtesy of the University of Michigan.

Granados also finds a strong correlation between carbon emissions and profits. Citing Joseph Schumpeter, Karl, Marx and Wesley C. Mitchell, he argues that profits drive our economic system. Given that the only thing propelling forward our jobless recovery is corporate profits (comprising 93% of the “recovery”), it’s hard to disagree. So not only would action on global warming decimate the profits of big, bad oil companies, it would destroy our entire way of life (not necessarily a bad thing, in my opinion).

For firms involved in extraction of fossil fuels and petroleum, any cut in emissions implies a cut in sales and, therefore, a cut in profits. This is a major reason for these firms to constitute “special interests” opposed to policies to reduce CO2 emissions. However, the coal and petroleum business interests are not the only ones seriously concerned by policies to cut emissions. The automobile industry, the transportation sector, and corporations in many other sectors of the economy would have their profits cut by any effective policy to reduce emissions.

Though with different levels of intensity, CO2 emissions are implied by almost any economic activity and almost any business, which means that, in general, policies to reduce emissions will very likely reduce business profits. Policies to cut emissions and prevent global warming will therefore very likely be opposed by business interests. Indeed, “think tanks” and “research institutes” funded by corporations and the business community have been for many years the most conspicuous skeptics of the contribution of CO2 emissions to global warming.

Indeed, our horrifyingly ugly, alienating and wasteful suburban living style is protected by powerful business interests who make lots of money off of our strip malls, highways, automobiles, cell phones, etc. Continue reading →