China's growth is making the carbon fat tail fatter
China's Carbon Footprint keeps growing. This news will not surprise Auffhammer and Carson (see their JEEM paper ). But, maybe it will surprise Tom Friedman? Rising CO2 levels means that some very low probability disastrous events become more likely.
China represents a very nice test case of the "amazing race" between scale, composition and technique effects. Environmental economists argue that these three factors determine whether economic growth leads to more or less pollution. In the case of China and greenhouse gas emissions, there are 1.3 billion people getting richer in China and manufacturing (composition) is a big part of the story and this sector is quite energy intensive. The Beijing Central Government is pushing a major technique effect (CO2 per RMB declining) but according to the latest news; scale is winning the race against technique. To mitigate GHG emissions, we need GHG intensity to decline faster than GNP grows in China. Without a carbon incentive, this sounds tough.
Anticipating this ongoing trend, it is time to really think about climate change adaptation. This is why I wrote Climatopolis . This September 2010 Basic Book will tell you all you want to know about how cities will compete in the face of climate change.
If you want to see me attempt to blend humor and economics while discussing climate change, watch my January 2010 Speech at the UCSB Bren School here .
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