Economists propose Climate Marshall Plan

In a presentation at this week’s climate change conference in Copenhagen, a group of Cambridge University economists say that radical reductions in greenhouse gas emissions could create a macroeconomic benefit if governments go about it the right way.

According to Terry Barker of the Cambridge Centre for Climate Change Mitigation Research:

“Where many current calculations get it wrong is in the assumption that more stringent measures will necessarily raise the overall cost, especially when there is substantial unemployment and underuse of capacity as there is today.

There is some evidence that harder greenhouse gas targets and regulation may actually increase benefits through improved innovation and distribution of low carbon technologies, and increased revenues from taxes or permits. These revenues can be spent to further support new technology and to lower other indirect taxes, ensuring the fiscal neutrality of these measures.”

The current economic crisis may be pushing environmental issues out of the public eye, but Barker says that this should be seen as a timely stimulus to tackling climate change, not a hindrance. The Cambridge researchers are proposing that the G20 economies adopt a “Green New Deal” focusing on sectors associated with low-carbon technologies. But this must be a global effort, says Barker:

“Any single country’s New Deal may fail if its extra demand for goods and services are met with imports. If we act together, everyone’s exports will increase and we can recover employment much quicker.”

Such an environmental Marshall Plan would be beneficial to all parties, he says.