Can our grandchildren help us fund the transition to net zero?
Global heating is a problem because politics has not caught up with technology. This is true in two ways. As in the case of nuclear weapons, the division of the world into nation-states makes agreement hard to reach. There is a second problem. We are taking rapid steps toward low emission technology—in areas ranging from solar energy to plant-based and lab-grown meat. Government subsidies have supported much of this progress, and ambitious initiatives modelled on the Apollo space programme could speed the process up. Yet efforts to accelerate the transition face fierce political resistance, with opponents claiming that they would cost too much. Without stronger support, clean technology may arrive too late.
If the voters refuse to stump up enough money for greenhouse gas mitigation, could we borrow it? By shifting the burden from today’s taxpayers to tomorrow’s, debt financing could help defuse political opposition. Such proposals have won the support of prominent philosophers and economists. Yet they face two objections. One is that it is immoral to transfer to future generations the burden of solving problems which the present generation has caused. The other is that it is impossible: resources used for climate change mitigation necessarily come at the expense of other spending that benefits the present generation. In a recent Climate Policy paper, I challenge both arguments.
Public debt is often seen as a paradigmatic injustice to future generations. It may seem that by passing on the bill for mitigation, we would just be robbing them in another way. In the United States, Senator Joe Manchin warned last summer of new debt’s ‘negative effects on our children and grandchildren’, before going on to stymie much of Joe Biden’s climate agenda. Democratic Senator Joe Manchin warns of ‘the negative effects on our children and grandchildren’.
These warnings may seem less troubling when we consider that many economists expect future generations to be far richer than the present one. Indeed, this is often cited in opposition to strong action on climate change: future people will be rich enough, some claim, to absorb the damage. That is the wrong conclusion to draw. If global heating proves worse than expected, future generations could end up poorer than the present generation rather than richer. If, on the other hand, we avert catastrophe, they should not find debt overly burdensome to pay off. Debt-financed mitigation is like taking out insurance at our grandchildren’s expense, reducing the risk that they will face an intolerable outcome.
The other objection to debt-financed mitigation is practical: in the absence of time machines, each generation has only the resources presently in existence at its disposal. Most investment is for the benefit of the present generation. If we shift these investments from their current uses to mitigation, today’s people will bear the burden. It is impossible, so the argument goes, to transfer the mitigation burden to future generations. Moreover, some may fear that ambitious spending on mitigation could fuel inflation.
But though public debt cannot expand the resources at the world’s disposal, foreign borrowing allows individual states to increase their outlays now in exchange for spending less later. This can shift a burden from present taxpayers to future ones. That might be of little use if foreign loans went on insulating houses or replacing boilers. The whole world must cut its emissions, and not all countries can run up foreign debt, nor can every country afford to. But one or more states could also use foreign borrowing to fund an ‘Apollo program’. If such research drives down the cost of clean energy, other states will adopt it whether or not they care about climate change.
"Debt-financed mitigation is like taking out insurance at our grandchildren’s expense, reducing the risk that they will face an intolerable outcome."
In an article published two years ago, the Swiss writer Ivo Nicholas Scherrer calls on his country to become a ‘climate workshop’ for clean technology, financing this initiative partly through public debt. What will be decisive for climate change, Scherrer observes, is not Switzerland’s own emissions, but those of the developing countries. ‘And here’, he adds, ‘it makes an enormous difference whether tested, climate-friendly technologies are available.’
That goes not only for Switzerland but also for the rest of the industrialized world. By far the greatest difference these states can make is in pioneering the development of cheap, clean energy. Future citizens should not object to debt financing that both helps the world avoid global heating and gives their own states a technological head-start. Like fascism in the 1940s, global heating confronts the world with a threat that could prove catastrophic. We were not afraid to run deficits to meet it then. States that can should not hesitate to do so now.