Capital Ethiopia Newspaper

Decarbonizing growth

The multifaceted challenges in which the global climate change poses on the world economy are real. The high-flyer propaganda pomp is the difference on the priority to be given as a solution, whether to growth or global climate change actions.
Regarding this, there are two contending schools of thought:  pro-global climate change actions and pro-sustainable economic growth proponents. The pro-global climate change actions camp vehemently campaign with much admired vigor for serious, sustainable and timely actions to mitigate the very many challenges of the global climate change, while the pro-sustainable economic growth camp, with equal energy and rigor, advocate for a primary priority to be given to sustainable economic growth.
However, looking between the lines of the challenges posed by the global climate change on the global economy in general and on the sustainable economic growth of developing countries in particular, advocating for global climate actions is indeed advocating for sustainable economic growth in real and practical terms.
Given the growing recognition of the cost that human behavior is imposing on our natural environment, it is impossible not to ask if the current model of globalization is environmentally sustainable. Rapid growth in the developing world has had a dramatic impact on both carbon emissions and demand for commodities over the last two decades.
According to the UN Statistics Division data of 2008, the US is still the largest emitter by some margin followed by Russia. Korea is then in third place, having overtaken Japan, the UK and Germany in recent years. Given that the latest data is for 2008, China may already have overtaken France. To the extent that globalization has been a driver of this growth it is implicated in serious environmental damage.
The transport that is at the centre of global trade is clearly implicated in global carbon emissions. For example, according to the International Maritime Organization 2009 report, international shipping contributed about 2.7 per cent of global emissions in the year 2007. Although this is much less than the oil-powered road transport and the coal-and-gas fired electricity that are the mainstays of ordinary life both in the West and the developing countries, it still remains a significant contributor.
But even to frame the question this way is to recognize that it is not about globalization, but about growth itself on the hydrocarbon-based model of the 20th century. If the expectations of billions of people in the developing world to achieve standards of living are even slightly comparable to those of the developed world, some level of growth is necessary. How these expectations could be denied is hard to see. Therefore, the answer to climate change is not to reverse globalization, but rather to decarbonize growth.
The more important question is to ask, “To what extent can globalization help or hinder the problem of addressing high-carbon growth?” The rapid dispersal of new information and communication technologies are acting to reduce carbon emissions. Accordingly, some business companies took serious measures to take advantage of these types of new information and communication technologies. For example, according to the World Wildlife Fund 2011 report, 47 per cent of companies in the UK have reduced the number of business flights they have taken in the past two years, with videoconferencing often used as an alternative.
This suggests that increases in trade in services need not increase carbon emissions in a linear fashion. Meanwhile, the global transfer of new technologies and funds to help their mitigation and adaptation can help countries to reduce their climate emissions. As low-carbon technologies proliferate, a global market will be by far the most cost-effective and efficient way of diffusing them throughout the global economy.
As well explained in the World trade organization 2011 World Trade Profiles data, another aspect of rising living standards in the developing world is the new demand for commodities. Between the mid-1970s and the turn of the millennium, global commodity prices were largely flat. While there were periods of significant short-term gain and decline, such as when oil prices collapsed in 1986, prices were broadly stable over the quarter century. This meant that real commodity prices, after adjusting for general inflation, fell sharply, with a corresponding reduction in the purchasing power of commodity-producing nations.
Since 2003 however, the story has been very different. The International Monitory Fund (IMF) 2011 World Commodity Price data shows that commodity prices have soared in both nominal and real terms. They only fell back temporarily during the global recession and have since moved to new record highs. These gains have been widespread, suggesting that, while supply constraints help to explain the degree of price movement in individual commodities, demand was the main cause of this surge.
The current new wave of globalization is now characterized by very rapid growth in a number of less developed countries with very large populations. Reflecting the stage of development they have reached, this rapid growth is translated primarily into demand for goods, with the result that these countries are placing extraordinary demands on global commodity markets. For example, the World Wildlife Fund and Oxfam UK 2011 in a joint Discussion Paper explained that the demand for oil and food are projected to rise by 40 and 50 percent respectively by 2030. This is likely to have a profound impact on real commodity prices in the future, as well as affecting the politics and stability of poor countries.
In Western economies, rising demand for commodities is likely to increase inflation and place downward pressure on living standards. Initially, the rapid integration of China into the global economy along with developments in other emerging economies led to falling prices for manufactured goods. This held down aggregate consumer price inflation mainly in the West and made it easier for National banks to achieve their inflation objectives.
However, in the second half of the 2000s, this effect was swamped by the effect of higher commodity prices. Food and fuel prices, in particular, drove inflation rates higher in developing countries. For example, despite the weakness of the government in leading the economy (as self-styled “Developmental State” with long and strong hands on every sector of the country’s economy), our Prime Minister, Meles Zenawi time and again took the world commodity price rise hostage for the country’s ever increasing price inflation, which posed series challenges to the performance of the economy and the living standard of the people. 
This also has distributional effects. Those on the lowest incomes spend proportionately more of their income on essentials like food and fuel and less on other needs. As a result, they are likely to be losers from this aspect of globalization.
To fix this and other problems of the current wave of globalization, finding a workable solution for the question posed at the beginning is indispensable. What is to be done to make the current model of globalization to be environmentally sustainable? Prominent intellectual authorities on this issue recommended the utilization of low-carbon technologies to sustain the economic growth.