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Dean Baker: States must be prepared to increase spending on environmental issues

22:46 | 17.09.2019 | Analytic

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17 September 2019. PenzaNews. Countries’ authorities should be prepared to increase the costs of implementing measures to reduce carbon dioxide in the atmosphere and prevent further global warming, says Dean Baker, the co-director of the Center for Economic and Policy Research (CEPR), author of Plunder and Blunder: The Rise and Fall of the Bubble Economy, in his article “Confronting Global Warming And Austerity” published in a number of foreign media.

Dean Baker: States must be prepared to increase spending on environmental issues

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“There clearly is much more that we can and must do in the immediate future to prevent enormous damage to the planet,” the article says.

However, according to it, major initiatives in the United States to combat global warming will almost certainly require some increases in taxes.

“There is likely some slack in the US economy (perhaps we’ll see more slack as a result of Donald Trump’s misfires in his trade war), but a major push involving hundreds of billions of dollars of additional annual spending 2–3 percent of GDP will almost certainly necessitate tax increases. This doesn’t mean we shouldn’t move quickly to take steps to save the planet, but these steps will have some cost,” Dean Baker believes.

Meanwhile, in his opinion, a Green New Deal Agenda in Europe is likely to lead to increased employment and output.

“In contrast, most of Europe is in a situation where it could easily make large commitments toward increased spending on clean energy, mass transit, and conservation at essentially no economic cost. […] The big difference is that Europe is much further from facing constraints on its economy. It has plenty of room to expand output and employment without seeing inflation become a problem,” the expert says.

Moreover, according to him, along with the economic component of the issue it is also important to consider the scale of environmental problems.

“The European countries have been far better global citizens in this area than the United States. Their per-person emissions are roughly half as much as the United States. Furthermore, many European countries have already taken aggressive measures to promote clean energy and encourage conservation,” the author reminds.

“Solar energy accounts for 7.3 percent of Italy’s electric power, 7.9 percent of Germany’s and 4.3 percent for the European Union as a whole. By comparison, the United States gets just 2.3 percent of its electric power from solar energy. There is a similar story with wind energy where the European Union’s installed capacity is more than 70 percent higher than the United States,” Dean Baker says.

But in the battle to slow global warming, simply doing better than the United States is not good enough, he says. The European Union can and must do more to reduce its greenhouse gas (GHG) emissions.

“The most immediate obstacle to aggressive measures to reduce GHG emissions in Europe is the continent’s mindless push for austerity. European governments, led by Germany, have become obsessed with keeping deficits low and balancing budgets,” the analyst says, adding that most even have budget surpluses – like Germany which budget surplus is close to 2.0 percent of GDP.

At the same time, the expert stresses that to some extent, fiscal austerity is not countries’ choice.

“The eurozone’s rules require low budget deficits for the countries that use the euro, but even countries outside the eurozone have joined the austerity party. The United Kingdom has a budget deficit of less than 1.5 percent of GDP, Denmark less than 0.5 percent of GDP, and Sweden has a budget surplus of close to 0.5 percent of GDP,” the author says.

He also pays attention to eurozone countries’ low interest rates and inflation, which has averaged just 1.0 percent over the last 12 months.

“If they were not limited by an unnecessary fixation with budget deficits, these governments could take strong measures to reduce emissions. For example, they could either pay directly to install solar and wind power, or provide large subsidies to businesses and homeowners. They could be subsidizing the switch to electric cars and making mass transit cheap or free, while they vastly ramp up capacity,” he believes.

In his opinion, it was the eurozone’s austerity requirement last year that prevented Emmanuel Macron from moving forward in this direction.

“Since France was already near the caps on budget deficits demanded by the rules of the eurozone, he was forced to impose new taxes to offset the additional spending he proposed to reduce GHG emissions. Since the taxes he imposed were largely regressive, they prompted a massive reaction (the “yellow vest” protests), which forced Macron to back away from most of his green agenda,” the expert says.

“If France didn’t face an artificial budget constraint imposed by the European Union, Macron could have simply borrowed to pay for his green agenda. It likely would have been far better received in that situation. People who are just scraping by will resent taxes to discourage energy use. They are less likely to get angry over subsidies to improve the insulation of their homes or to install solar panels,” Dean Baker adds.

Meanwhile, according to him, not only developed countries face environmental problems: difficult situation has arisen due to fires that devastate the Amazon rainforests.

“While this is most immediately attributable to the development policies of Brazil’s far-right president, Jair Bolsonaro, there actually is a much deeper problem here. […] Rich countries have engaged in large-scale deforestation of their own lands, as well as having paid developing countries to destroy much of their natural forests to provide wood and other resources. In addition, we have been spewing vast amounts of carbon dioxide into the earth’s atmosphere for more than a century,” the analyst says.

In his opinion, preservation of the unique Amazonian forests is crucial in the fight against global warming as they matter hugely for limiting GHG, but placing all of the blame on Brazil “is fundamentally misrepresenting the history of the problem.”

“Since climate change really is a global problem, we need to have the most effective measures to be taken, regardless of the country,” the expert stresses.

From his point of view, Brazil must act to preserve the Amazon, but the rich countries will have to foot the bill.

“This is both a question of fairness and realism. We can’t force Brazil to protect the Amazon. […] We can make it more profitable for Brazil to protect the Amazon than to destroy it. And, with so much slack in the EU economies, this would be a great use of some of their resources. Perhaps one day we will have a sane government in the United States and we will contribute our share,” Dean Baker concludes.

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