News | Climate Change

http://www.timeslive.co.za/scitech/article857374.ece/Climate-fight-can-boost-recovery

Addressing climate change could contribute to the recovery of the global economy, said Nobel prize-winning economist Joseph Stiglitz.

Stiglitz was delivering a lecture on climate change and economic development in Pretoria. He was on a short visit to the country and had already held meetings with various cabinet ministers.
According to Stiglitz, the world would suffer the effects of the global financial crisis for several years. "The crisis is every bit as bad as I anticipated and the problem will last two to three years still.
"This means you have time to read my book," he quipped, a reference to "Freefall - Free Markets and the Sinking of the Global Economy", published last year.
Wrong carbon price
According to Stiglitz, the world price of carbon was incorrect. "The true price should be about $80 per ton." While he hoped that the price of carbon would be upped at the Copenhagen summit, this did not occur. The consequence was that countries were not making investments necessary to ensure a lower-carbon future.
But neither could they benefit from the job creation that green industrial development would bring.
Currently, green investment could not contribute to global aggregate demand, which would assist the global economy to recover from its current state, Stiglitz stressed.
However, a price change would not be enough on its own to change the situation and there was a need for a regulatory framework for restricting coal-fired power stations as well as transport systems.
According to Stiglitz, climate change was very real. "It's going to have an enormous affect on everyone all over the world and its manifestation right now is the floods in Australia."
While the full economic consequences of climate change for countries' economies could not be established, "they will be severe". Coastal towns and cities would have to be moved as the sea level rose and fisheries would suffer severely, Stiglitz said.
The only uncertainty was the pace of climate change, which appeared to have quickened.
Turning to SA and the possibility of a green economy for the country, he said the country faced a challenge in that it was a high carbon-intensive economy.
However, an emerging market like Brazil had been successful in its efforts to fight climate change as it had produced sugar-based ethanol and the US - to compete - had to subsidise corn-based ethanol.
Stiglitz said there was no reason why SA could not achieve similar success.
Forex decisions needed
Asked how far governments should intervene in the economies, Stiglitz said that governments were compelled to make decisions.
"Even to make a decision not to intervene in the exchange rate is a decision." He added that SA had a particular problem in that it had "lots of resources".
This led to a high exchange rate and the scenario of a rich country with poor people.
A high exchange rate made it hard to compete globally as well as to create jobs, and therefore high levels of unemployment were prevalent.
This, Stiglitz said, had been worsened by the US's monetary policy of quantitative easing.
"I am very critical of quantitative easing because its benefits in the US are very low because we haven't fixed the banking system yet."
Stiglitz added that money had been flowing not to the US or Europe, but rather to "economies foolish enough not to put up barriers".
He noted that even though Chile had a fairly conservative government, it had decided that it had no choice but to intervene in currency matters in recent weeks.
"It's important to manage an exchange rate and to keep it competitive and stable."
Stiglitz added that one thing the world had learned from the 2008 economic and financial crisis was that markets were not self-correcting. "However, intervention has to be done carefully.
"In the US, one of the most successful industries, the internet, is based on government support as the first browser for it was created by the US government."
Sitgliz noted that in an open democracy, if government "went too far" in intervening in the economy, "then they'd hear about it".