Friday, December 2, 2011

Exporting pollution and jobs

George Osborne had a few Green Concessions in his Autumn Statement, although maybe not enough - more words than actions but it is a good start as it at least acknowledges the importance of climate change for the economy.

Here is a part I found interesting:

"We are not going to save the planet by shutting down our steel mills, aluminium smelters and paper manufacturers," Osborne said, announcing the expected rebate. "All we will be doing is exporting valuable jobs out of Britain."

From an economic perspective, I dislike it - it smacks of protectionism and subsidising some sectors when British society and developing societies would all be better off if British steel mills, aluminium smelters and paper manufacturers did indeed shut down and we imported these goods from other places.

But I do agree that from a climate change point of view, he is probably right. Brits will not stop consuming these goods - they will just be imported. The pollution will just be shifted elsewhere. Here is some excellent analysis from The Oil Drum blog which shows that carbon emissions can decline in, say, the UK, but it gets shifted to, say, China (HT: MM). The planet as a whole does not benefit. Indeed, due to transport and the fact that China is less energy-efficient there may be a short term negative impact (but perhaps longer term positive one thanks to learning to be more energy efficient).

This is not a sufficient argument for bad economics though. Instead it means that it is the consumers and not the producers of carbon who need to pay for it. Shifting dirty production abroad and importing the goods is just cheating. It should also imply that taxes in the West help to pay for industrialising countries to become more energy efficient.