What are the implications, if any, of the financial crisis for global warming? (in 1000 words)
The rampant, unbridled, unprecedented growth of the global economies in the past decade has heated up (pun intended) the entire system. The grips of the financial crisis and recession have resulted in some cooling, especially on the front of global warming. Global warming is the effect of man-made greenhouse gases and the principal source of man-made greenhouse gases has always been prosperity. With shuttered factories that do not spew carbon dioxide; the unemployed who don't buy new cars and drive fewer miles in their old cars; the struggling corporations and families that cut back on travel and entertainment events, gasoline demand and hence the consumption has fallen. This is not the result of a sudden greening of the people's consciousness but of the rapid rise in the price of oil during the first half of 2008, followed by the full impact of the current economic crisis. There seems to be a positive effect of the recession on global warming, with decreased emission of green-house gases.
However, the environment benefits of economic decline are fragile because they are vulnerable to intervention by governments, with government programs, intended to revive the consumer spending and the economy, targeting a number of public investment projects (like new roads and airports), which result in big carbon footprints. Also, the crisis has let loose a number of countervailing forces that affects the broader issues in the financial markets that do not augur well for the development and the sustainability of clean energy in the long run. These forces are :
Clean energy projects typically entail massive up-front capital outlays, followed by relatively low ongoing costs. Banks, which provide the money for such up-front expenditures in the form of loans, are having a hard time (thanks to the credit crunch and liquidity freeze) and are averse to any new investments / loan disbursements. Some studies suggest that if the current lending trend continues, the debt finance of such projects would be able to meet only 75% of the required investments. With decreased supply of funds available to the developers to take their plans form the drawing board to the reality, future of such projects looks bleak.
The (speculative) spurt in the prices of fossil fuels had created an environment which was conducive for the growth of renewable energy. Now that the price of crude is at low levels, very little incentive lies for the people to adopt the same. To simplify: dirty energy competes with clean energy. High fossil fuel prices make clean energy projects look more attractive.
The current scenario has made it difficult for governments to show / commit a political willpower to overcome the problems of global warming and climate change. They are up against more pressing issues, like unemployment and health care, at hand and hence there is a difficulty on getting a consensus on a policy, on the future of such initiatives, off the ground, especially by countries like US and
Although it is very difficult to make predictions about the direction of the economy, it appears likely the current downturn will continue for some time, which is bad for the climate, mainly because of the way the weak economy interacts with the other factors that affect the clean energy. However, the hope that people across the globe will recognize that global warming is a life and death issue for future generations and that we must take necessary steps to change our automotive purchasing and usage behaviors to conserve the Earth's natural resources, fills my heart with optimism.
As countries around the world move from deploying monetary and financial stabilization measures, to boosting fiscal spending to mend real economies, there exists a need to use the opportunity to bring about a new, greener, carbon-reducing world order and try to boost demand in the best way possible by focusing on low carbon growth in future
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