Climate playlist gets new hit

This week will probably go down in history as the Week of the Big Oil Break-Up but OPEC+ wasn’t the only important story over the last five days. In fact, there was one report that I thought was at least as important as the OPEC+ decision to cut a million barrels from daily production.

The report, titled Further Delaying Climate Policies Will Hurt Economic Growth, was produced by two IMF employees and released on Wednesday. Its main argument: the transition will cost a lot but it will cost even more if we procrastinate with it.

Ladies and gentlemen, friends and neighbours, may I present to you the latest hit on the Climate Change playlist, following megahits such as “From Global Warming to Climate Change” and “We Don’t Actually Care about Trees”.

The new song is called “The Longer We Wait The Costlier It Gets” and has every chance to outsell the other two. Needless to say, I strongly believe this is a bad thing for all of us and the planet.

“The world must cut greenhouse gas emissions by at least a quarter before the end of this decade to achieve carbon neutrality by 2050. Progress needed toward such a major shift will inevitably impose short-term economic costs, though these are dwarfed by the innumerable long-term benefits of slowing climate change.”

This is the first paragraph of the release, authored by Benjamin Carton, senior economist at the IMF’s research department, and Jean-Marc Natal, who is — and I’m pasting it because it’s too long to copy — Deputy Chief in the World Economic Studies Division in the IMF’s Research Department.

Now that the credentials are established, let’s look at that paragraph. The shift, the authors say, will inevitably impose short-term economic costs. Well, call me an elephant but I distinctly remember reading news reports arguing that renewables are much cheaper than fossil fuels at least three times a week for as long as I can remember.

I’m sure it’s because wind and solar are really cheap but there are other things that are not so cheap and we only mention them when there is really no way around it. And because way too many people have lately started to question the cost/benefit balance of the transition we have been forced to mention these other things such as raw materials and infrastructure, without which the transition would be impossible.

But the good people at the IMF have gone a step further — in step with other transition advocates, by the way, it’s a trend — and admitted to the high cost of the transition with the stylistic equivalent of a “Can you really judge us?” facial expression.

Translated in less pompous language, the underlying message is “Look, we’re killing this planet because there’s too many of us and we’re using a crapload of fossil fuels, so we need to go net-zero otherwise we’ll die. It’s gonna cost us trillions but if we don’t do it, it’s gonna cost us more trillions.”

I sense a stroke of genius behind this latest hit, in all honesty. It is right there with the switch from “warming” to “change” when it became way too obvious that anthropogenic* changes in weather patterns are not singularly resulting in hotter weather.

The authors then go on to make the argument that accelerating the transition away from fossil fuels will only cost us a bit of an economic slowdown, to the tune of 0.15% to 0.25% for the global economy between now and 2030. That’s not a whole lot, right? Not at all. And then the paragraph ends with this:

“The more difficult the transition to clean electricity, the greater the greenhouse gas tax increase or equivalent regulations needed to incentivize change—and the larger the macroeconomic costs in terms of lost output and higher inflation.”

That greenhouse gas tax is the main concept of the authors: if governments start taxing greenhouse gas emissions but be serious about it, the transition could be over by 2030. With bells on.

It might be just me but seeing what the greenhouse tax legislation in the EU did for the competitiveness of European businesses I have certain doubts the transition could be as easy as that.

Yet the authors note that “We assume that each region introduces budget-neutral policies that include greenhouse gas taxes, which are increased gradually to achieve a 25 percent reduction in emissions by 2030, combined with transfers to households, subsidies to low-emitting technologies, and labor tax cuts.”

I would be very grateful if any of you could explain to me, as to the layperson that I am, how exactly would greenhouse gas taxes be budget neutral? I do like the italicised gradually, though. I like it a lot. It looks like a “Calm down, it’s not THAT bad” emphasis.

Indeed, reading on, it’s not that bad at all because based on their assumptions and modelling, the authors calculate that the accelerated transition would only cost the global economy a moderate increase in inflation, at between 0.1 and 0.4 percentage points. That’s next to nothing, if you think about it. I mean, Germany’s industrial inflation for August topped 45%.

“To curb the costs, climate policies must be gradual. But to be most effective, they also need to be credible. If climate policies are only partially credible, firms and households will not consider future tax increases when planning investment decisions.”

It took me a while to decipher those “investment decisions” that households apparently make because I’m not used to thinking of my family as an investment unit. And then it hit me, before I got to the net line, which laid it put plainly. They must be talking about things like rooftop solar and additional insulation, I thought, and yes, they were. I do wonder why they didn’t go the consistent way and italicise gradual again.

In other words, the underlying message continues with “You’ll need to pay for the transition but we won’t just open the vein and let your blood pour out till you die, we’ll do it gradually, so you survive.” Excuse the no doubt overly dramatic metaphor but it was handy. Blame those who came up with “companies bleeding cash”.

The rest of the release talks about tradeoffs (in the form of different GDP impacts from different scenarios) and credible central bank policies — a phrase that, I admit, made me laugh out loud.

So there we have it. The IMF just added a new song to a hit list that has been on every radio station and every news website for about a decade now. It has been used as soundtrack for various films and TV series and included in primary school textbooks and university curricula.

I think Climate Change deserves a TM symbol after its name. It has earned it. It has turned into perhaps the biggest collective PR, marketing and advertising undertaking in modern history. All for the good of all of us, of course. What’s a few lost freedoms and higher taxes compared to the warm fuzzy feeling you’re saving the planet one American tree-turned-into-European-pellets at a time?

Please be sure to note how gracefully I avoided the p-word, not because I don’t believe that’s what’s actually happening but because the poor p-word has recently become the most abused term ever. The p-word now means “Anything I don’t agree with or don’t like the sound of.”

It seems that the IMF has joined those disliking the sound of suspicion that the energy transition will not be as cheap as advocates have been claiming for years and have decided to go the way of admitting part of the truth to avoid being blamed for withholding the whole truth from the public. Stay tuned for the next hit, probably titled something like “No One Needs Electricity 24/7”.

*I know some of you have no truck with the idea that humankind’s behaviour affects the climate but let’s look at the facts: we have been changing ecosystems for centuries, erasing many, irreversibly transforming others. This has consequences, including on weather patterns. The perks (and risks) of being the dominant species.