Rafał Woś: Do you want to save the climate? Apologize to your debt

Climate neutrality (called “net zero” in English) is on everyone’s lips lately. It is even fashionable to give a specific date. Recently, more and more often such date is the year 2050. It is then that the most important (and the most emitting) economies in the world are to become climatically passive. To achieve this goal, huge investments are required. In principle comparable only to the war effort of two global conflicts in the twentieth century.

Everything has to change. First of all, the method of obtaining energy – so that it comes either from renewable sources or from nuclear energy. But also to be stable. It means that we should be warm, bright, nice and online without the risk of a blackout. That is, without sudden power cuts caused by the failure of today’s energy storage technologies. Which is the Achilles’ heel, especially of green energy. This is because it doesn’t always blow and shine strong enough. And we need energy constantly.

In addition, the adaptation of global individual, freight and passenger transport to green requirements. It is obvious that we will not give up mobility and the world as a global village so easily. Then the houses where we live and the buildings where we spend our lives: working, learning, healing, praying, exercising. So that they do not spoil the atmosphere and (which is important) that they do not lose energy. And finally, greening industrial production. Here, the outlays are the lowest, because today industry is the branch of the economy that is best prepared for ecological changes.

How much will it cost?

According to a report by the London consultancy Vivid Economics – commissioned by the latest UN climate summit in Glasgow – the bill for such a green transformation will be … take a deep breath … 125 trillion dollars. Recall that the Polish trillion has 12 zeros. That’s $ 125,000,000,000,000. In the English-language literature, where the so-called short scale, you will read about 125 “trillions”. But let us stick to the long scale we use. According to it, out of those 125 trillion, 32 trillion are necessary to spend by the end of this decade.

For comparison, let us only recall that the annual nominal GDP of the largest economy in the world, i.e. the United States, amounts to approx. USD 20 trillion. China is 16 trillion. Japan 5 trillion Germany 4 trillion Poland 0.6 trillion Suppose the entire US economy wants to finance the global energy transition and works only for the net zero. And all citizens and corporations do not earn a cent and live only on blackheads. Then six years of work of the American economic machine at 100 percent would have to pass. turnover to pay just that bill. China’s GDP would pay off the green transition after 8 years of hard work. Japanese after a quarter of a century. German after 31 years. And so on.

Of course, this is only a comparison to illustrate the scale of the challenge. But this cost is real. And it will be implemented. So someone will pay? But who?

Money for green transformation can (and will) come from three sources. First, from commercial actors. That is private enterprises and investment funds. So profit-oriented institutions that will want to earn from the green revolution. By the way, incurring some own outlays. Nothing wrong with that, of course. This is how capitalism works.

But saying that the private sector itself will leverage “net zero” is a fairy tale for good children. Knowing the prudence of private business and the limited propensity to risk, this money is not enough.

Part of the cost of the green revolution will, of course, be passed on to the citizens. They will either pay directly in the form of “environmental taxes”. Such as, for example, the German model of co-financing renewable energy directly from the taxpayer’s pocket. Or in a more hidden formula. That is, through increases in electricity, gas or fuel prices. This is a model that we know very well from recent months. Also in Poland.

But citizens’ pockets are too shallow to finance the transformation. Especially in poorer countries. Or the rich, but very unequal. There, consumer financing would have ended in a social revolt and a great consumption crisis.

Anyway, it cannot do without state money. There is nothing strange about it either. After all, states are the most important money issuers in modern capitalism. And commercial banks only help them in this process by issuing a loan. But this state has a monopoly on the production of money. And for its competitive borrowing.

This, however, means that the green transformation will have to be financed by public debt. Obviously hauled in various forms. Partly in the classic model (through the issuance of treasury securities). And probably and more and more often also through the intervention purchase of the same securities and placing them on a holy day in the resources of the central bank. And their “utilization”. This is already happening – this is how covid debt is utilized. In the euro area, in America and in smaller countries.

We must therefore be clear today. If we want to meet the climate goals of the 21st century, we must throw into the trash all the fears that have been put into our heads by the liberals over the past 40 years. Fears that public debt should be kept in check and monetary authorities should remain apolitical and focused solely on fighting inflation. We have to think again. Otherwise, we won’t be dragging the 125 trillion.

Unless we save ourselves to death. We will demolish the welfare state, retirement security, and abandon the fight against inequality. In a word – we will save on people. Just to meet the green challenges.

But then we will be like this joke about a farmer who boasted that he would teach the horse to eat. “He will fall dead,” neighbors warned him. But he insisted and starved. After a week the horse did indeed die. “So what, the landlord? You did not learn it,” said the distressed neighbors. “How did I not unlearn it?” The farmer insisted. “Another day, two at the most, and he would certainly unlearn.”

Is this what we want for our societies?

Rafał Woś

The author of the column expresses his own opinions.


About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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