German Cabinet Minister Plays a Phony Numbers Game on Greenhouse Gasses and Economic Growth

In mid-December, Germany's Federal Minister for the Environment, Nature Conservation and Nuclear Safety -- Barbara Hendricks -- published an opinion piece at CNN in which she makes some dubious claims:

"Between 1990 and 2012, for example, greenhouse gas [GHG] emissions in the EU fell by 18%, while the overall economy grew by around 45%. The reality is that greater prosperity doesn't have to mean more greenhouse gas emissions, poorer environmental protection or higher resource consumption. In fact, in the future, the opposite will surely prove to be true: Only those economies that take the Earth's planetary boundaries seriously will be able to achieve sustained success."

What Minister Hendricks fails to adequately discuss is the time profile for the EU's GHG emission reductions and corresponding economic growth since 1990. If she had, the flaws in her argument for dramatic reductions in GHG emissions would have been exposed.

Yes, GHG emissions in the EU fell by 18% between 1990 and 2012. Actually, they declined by 19%. And yes, the EU's economy grew by 45% in real terms over this time frame.

But here is the time series for both variables.

Between 1990 and 1993, there was a large decline in the EU's GHG emissions, and this period corresponded with very low economic growth. Since 2007, there has also been a substantial decline in GHG emissions, and non-existent economic growth. In fact, between 2007 and 2012, the EU's real GDP contracted 0.6%.

From 1993 through 2007, there was effectively no change in the EU's GHG emissions. This was also the period during which essentially all of the EU's economic growth since 1990 took place.

A regression of annual real GDP growth against annual change in GHG emissions yields a highly significant relationship: the more that GHG emissions are cut, the lower the economic growth

Of course, two-way causation is undoubtedly at play: (1) policies intended to lower GHG emissions harm economic growth; and (2) lower economic growth leads to reduced GHG emissions. But overall, this presents a classic catch-22 for the GHG reduction advocates -- reducing GHG emissions will unequivocally hurt the economy, or we must intentionally reduce economic growth in order to lower GHG emissions. Two sides of the same coin, both of which are undesirable.

This is as rational individuals would expect. The laws of thermodynamics dictate there is no such thing as a free lunch (e.g., perpetual motion machines are thermodynamically forbidden). We see the analogous postulate at play with regard to GHG emissions and economic growth: in order to reduce one, you must reduce the other relative to the non-GHG reduction counterfactual.

It is time to move off the unicorn ranch and collectively accept there is no free lunch on the GHG emissions policy bandwagon. Those who try to convince you that we can massively lower emissions without accruing equally large economic harm are not accurately reflecting the experiences that developed nations have had during the past couple decades.

In mid-December, Germany's Federal Minister for the Environment, Nature Conservation and Nuclear Safety -- Barbara Hendricks -- published an opinion piece at CNN in which she makes some dubious claims:

"Between 1990 and 2012, for example, greenhouse gas [GHG] emissions in the EU fell by 18%, while the overall economy grew by around 45%. The reality is that greater prosperity doesn't have to mean more greenhouse gas emissions, poorer environmental protection or higher resource consumption. In fact, in the future, the opposite will surely prove to be true: Only those economies that take the Earth's planetary boundaries seriously will be able to achieve sustained success."

What Minister Hendricks fails to adequately discuss is the time profile for the EU's GHG emission reductions and corresponding economic growth since 1990. If she had, the flaws in her argument for dramatic reductions in GHG emissions would have been exposed.

Yes, GHG emissions in the EU fell by 18% between 1990 and 2012. Actually, they declined by 19%. And yes, the EU's economy grew by 45% in real terms over this time frame.

But here is the time series for both variables.

Between 1990 and 1993, there was a large decline in the EU's GHG emissions, and this period corresponded with very low economic growth. Since 2007, there has also been a substantial decline in GHG emissions, and non-existent economic growth. In fact, between 2007 and 2012, the EU's real GDP contracted 0.6%.

From 1993 through 2007, there was effectively no change in the EU's GHG emissions. This was also the period during which essentially all of the EU's economic growth since 1990 took place.

A regression of annual real GDP growth against annual change in GHG emissions yields a highly significant relationship: the more that GHG emissions are cut, the lower the economic growth

Of course, two-way causation is undoubtedly at play: (1) policies intended to lower GHG emissions harm economic growth; and (2) lower economic growth leads to reduced GHG emissions. But overall, this presents a classic catch-22 for the GHG reduction advocates -- reducing GHG emissions will unequivocally hurt the economy, or we must intentionally reduce economic growth in order to lower GHG emissions. Two sides of the same coin, both of which are undesirable.

This is as rational individuals would expect. The laws of thermodynamics dictate there is no such thing as a free lunch (e.g., perpetual motion machines are thermodynamically forbidden). We see the analogous postulate at play with regard to GHG emissions and economic growth: in order to reduce one, you must reduce the other relative to the non-GHG reduction counterfactual.

It is time to move off the unicorn ranch and collectively accept there is no free lunch on the GHG emissions policy bandwagon. Those who try to convince you that we can massively lower emissions without accruing equally large economic harm are not accurately reflecting the experiences that developed nations have had during the past couple decades.