Recurring Decimals…..

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Global Warming: India, China and the US

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Cross-posted from here. My not so subtle manner of letting people know that I am co-blogging at yet another blog. Details later.

Over at Marginal Revolution, Tyler Cowen outlines various options/scenarios vis-a-vis India and China’s fossil-fuel consumption (and consequent contribution to global warming) and possible responses from the US.

1. China and India are less locked into fossil fuels than is the United States, and as Brazil has done they will take the lead in moving toward energy alternatives. America does not need to get them “on board,” and given their cooperativeness American energy policy will matter at the margin.

2. We can cut a deal with China and India at a suitably presented international convention. China and India will enforce this deal and abide by it, overcoming previous problems they have had ruling their provinces and avoiding excess decentralization.

3. Forget about the international conference, we can pressure China and India by twisting their arms. Like we’ve done with the Chinese currency. We also can threaten them with trade taxes, as has been discussed in Europe.

4. We are best saying nothing to China and India and calling no conference. There is some chance they will act unilaterally, out of pride and the desire to upstage the United States. External pressure will be counterproductive, remember British imperialism and the Opium Wars?

5. China and India will continue to be major polluters. If we tax American-generated carbon we pay a big price in terms of economic growth but make no real progress on global warming.

6. We do not know what China and India will do, but the United States is a world leader and ought to move first, set a good example, and do the right thing.

As noted later in the post, the cost for either India or China to be reduce global warming contribution might not be very high in real terms, but the important problems are institutional.

There are potential incentives (#2) and disincentives (#3), both political and economic, that might compel the two countries to overcome such barriers. But I doubt that either country will act unilaterally (#4) out of pride or to upstage the United States, even if under the remote possibility that USA is able to set a ‘good example’. Conventional wisdom says that while protecting the environment and reducing fossil fuel consumption are noble goals, China and India’s interest at this stage is obviously better served through economic growth and that is where all policy will be directed.

What interests me though is the flip side question: will investment in cleaner energies now actually make the Chinese and Indian economies grow at at a more rapid pace ? I am not an expert by any stretch and would welcome comments from those who are. However, a couple of intuitive points come to mind.

First, cleaner burning systems means more efficient systems, which should be beneficial in economic terms, right ? Second, independence from natural gas might serve the political interests of the country, since it would not have to pander to the interests of oil rich countries to ensure smooth economic growth.

As noted in the original post, Brazil has taken a lead in innovation towards energy independence – would be interested to know if how that has helped the growth of their economy.

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Written by BongoP'o'ndit

January 10, 2007 at 12:18 pm

Posted in Economics, Environment

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