Author: Dominic Meagher

Paul Dibb, writing for The Australian, claims “Garnaut’s 500-page report seems to be based on an acceptance of the more calamitous end of the spectrum”. However if anything, Garnaut is optimistic.

Since (at least) early 2007 Garnaut has been writing and talking about a global “Platinum Age” of economic growth, named in relation to the “Golden Age” coined by renowned economic historian Angus Maddison. Maddison identified the period from 1950-73 as a “Golden Age” of global economic growth (growth averaged 4.9% during the 23 year period, the most rapid sustained global growth in the history of humanity). Garnaut has been pointing out that growth in 2007 exceeded 5% for the fourth successive year (more rapid than the Golden Age – a Platinum Age).

One of the most basic relationships in environmental economics describes the extent of human induced environmental degradation as a function of population, economic activity, and an environmental impact coefficient (the Holdren-Ehrlich Identity). The environmental impact coefficient is the degradation we cause per person per dollar.This identity makes it clear that if the economy grows rapidly and population remains the same, the only way to avoid increasing environmental degradation is to decrease the environmental impact coefficient: do things more cleanly. So far so good…

Economists have, for a long time, assumed that China would not continue growing as quickly as it has. This idea seems to be based on the notion that such rapid progress simply can’t be sustainable. The International Energy Outlook 2005 (pdf) projected China’s growth from 2002 – 2015 at 6.4% (see Table 2). Half way to 2015 China is still growing at almost double that rate.

Garnaut understood the significance of China’s economic growth for the world’s economy earlier than most people. Australian’s will remember hearing a lot about the resources boom during the 2007 election; this allowed Rudd to dissolve Howard’s central claim to legitimacy – after all, with China’s demand for resources, anyone could have delivered 11 years of consistent economic growth. 2006/2007 was when most people began to become aware of China’s global economic significance.

Garnaut is largely to thank for Australia’s awareness of the importance of the Chinese led resources boom to Australia’s economy. [see here (pdf)]

Garnaut has an unique ability to grasp the key features of the global economy. He understands China’s economy in particular. He understands that India will likely follow suit. And he understands that the (largely coal based) structure of these two economies mean that as we rapidly increase our economic activity (and our population), we will be increasing, not decreasing our environmental impact per dollar per person.

It is Garnaut’s understanding of the key drivers of the global economy – not the US financial system, but China and India’s industrialisation – that define his perspective. The world economy will grow. Quickly. And increasingly dirtily.

This assumption underpins his thinking when he writes in Chapter 4 (paraphrased):

The high-end scenarios (projecting carbon emissions growth at 2.5% to 2030) have often been dismissed as extreme or unrealistic. However the Platinum Age projections assume emissions growth at 3.1% to 2030.

(See Figure 4.8 – click to enlarge)

So Paul Dibb is correct in one sense: Garnaut’s projections are at the more calamitous end of the spectrum of projections. However since most projections fail to appreciate the importance of China and India, we should consider Garnaut’s projections at the more realistic end. The others are wildly naive in their optimism.