The Balance between Economic Growth and the Environment

The Nobel Prize in 2018 has been awarded to two American economists: William Nordhaus (77) and Paul Romer (62). They have been chosen for this honor because of their very novel contribution to the research connecting economic growth and the environment. They have come up with a complex model depicting the effect of environment perturbance on economic growth. We already were aware that the harm we do to our nature affects our health, our resources, the ecological balance etc. But never did we know the exact monitory loss caused to us for every ton of our carbon footprint. The model tells us the exact dollar loss for every ton of carbon-di-oxide produced by us. This model gives us a way to predict that if we spend even one less dollar in developing the technologies to curb the amount of C02 than the dollars equivalent to the amount of C02 being produced, we will be successfully saving our future for a long time without hampering our economic growth.

Coincidentally, this award was announced at the time when UN claimed that within 12 years from now, the environment's temperature could increase by 1.5 times if we keep polluting our environment at the same pace. Basically, this is a global alarm to all the countries to start developing less harmful technologies and to start enforcing the governance and some policies to tax the producers of the harmful technologies which cause the enormous amount of carbon footprint. No discrete solution to impose strictness on nations with higher footprints has been given by the two winners. The theory of taxing (proportional the amount of C02 produced) proposed by Nordhaus does not seem to be a practical solution. This is because the money will indirectly be charged from the consumers of the benefits of the technology (the developing nations) rather than the producers (developed nations) of the technology which is actually causing the pollution.

The research also aims to bring forward the ways to stop the effects of environmental change. The solution is in our knowledge. The innovation is our tool. Also, we need good governance policies and lifestyle changes. They say that such technology or innovations have to be developed which cause less harm. Now, there is an interplay between innovation, economy, and the climate. Every nation has two kinds of investment policies: long-term and short-term. When a nation wants to invest in researching the new technologies to improve the environmental conditions, it is a long-term investment and obviously, it affects the short-term investments of developing nations because their primary focus is to feed and clothe their population. In such cases, it is the responsibility of the developed nations to invest in the long-term finances for developing high-class technologies, either by themselves innovating or funding the research in countries like us. After all, those nations are and have been the primary cause of this level of environmental degradation in the first place. But, some countries like the USA do not want to participate in global coalitions at all (thanks to Trump’s policies) and some pseudo developing countries like South Korea and Soudi Arabia hide behind their “developing” tag so as to restrain from contributing. In this case, we have to find a sweet spot such that the economic growth and the environment can go hand in hand without us having to beg in front of developed nations.

Sources: 

https://www.youtube.com/watch?v=NUP4aPNOrOw

https://www.nytimes.com/2018/10/08/business/economic-science-nobel-prize...