FCDO Next Generation Economics competition 2021 to 2022

‘What economic policies should the UK government use to facilitate a fair transition away from fossil fuels globally?’

Dear FCDO’s Chief Economist,

In a world where climate change is threatening our land, lives and capacity to grow economically, change must be made to ensure we can facilitate a fair transition away from fossil fuels globally. To do so, we can look at Kaya Identity, which tells us the main factors influencing global carbon emissions, some of which are population growth and economic activity.

Population growth makes it more difficult for governments to transition away from fossil fuels because it means that more energy is needed to provide for people. Policies such as the One-Child Policy meant that less energy was used than if the policy hadn’t been implemented, which is beneficial for the environment. However, these policies may also facilitate the transition away from fossil fuels because less investment is used overall in all sectors of the economy due to the decreased need to provide for people. This means that more investment can be made in green energy, which could be made possible by guidance from the government. Firms and state-owned companies could relocate their capital from fossil fuels to green energy, and an incentive for this may be long term gain.

However, policies affecting childbirth pose many problems. Firstly, it could be seen as immoral because giving birth can be seen as an inherent human right and instinct. Also, a lower population results in lower economic growth as labour is one of the factors of production, and lower population means that less people can work, reducing the productive capacity of the economy. Therefore, controlling population growth may not be seen as beneficial for many governments as although it may aid the transition away from fossil fuels, it can also result in lower economic activity which is a main aim for many governments.

Limiting economic growth may also allow governments to transition away from fossil fuels as it means that there would be fewer emissions and the possibility for more investment into green energy. Although limiting production using fossil fuels would result in less consumption and therefore a lower rate of growth, it would have a hugely beneficial effect on the environment as fewer non-renewable resources would be consumed, and the shift towards renewable resources could occur as firms may have more incentive to invest in solar, wind or nuclear energy. Where economic growth is limited, there would be fewer emissions because there would be less consumption due to decreased consumer confidence, and therefore lower rates of production, including that which uses dirty energy.

On the other hand, limiting economic growth to aid the environment may not be possible. Economic growth is a primary aim of many economies, as it leads to a circulation of more income and better living and working standards for many. Furthermore, limiting economic growth would also result in poorer education, which limits the innovation required to create a means of renewable energy that appeals to firms. In HIC’s, we can see a strong movement towards a world where global warming is kept under control. This is being achieved through acts such as veganism, recycling and consuming more local and seasonal produce at an individual scale. While the UK, France and Italy account for 1% of emissions worldwide each, China accounts for 28% and India 7% showing that, perhaps, developing countries need to economically grow before they can reduce emissions via limiting economic growth.

Therefore, through these actions, I believe that we can move towards net zero emissions and facilitate a fair transition away from fossil fuels globally. Although this will likely be achieved in the long-run, many governments are eager to limit climate change, so many would do whatever possible to achieve their goals.

Kind regards,

Lola Barnard