President-elect Obama’s Budget Problems

Cure the economy or tackle climate change

Great news for anyone worried about global warming: The United States (and the rest of the industrialized world) is now employing the only proven weapon for lowering greenhouse-gas emissions.

Unfortunately, that weapon is a massive recession.

Which poses a dilemma for President-elect Barack Obama: He can’t simultaneously cure the economy and the climate, as he has promised.

The evidence on recession and emissions is solid. Consider Michigan: A Worldwatch Institute study last year found that the state posted less than a 1 percent increase in CO2 emissions from 1990-2003. Over the same period, neighboring Minnesota (which gets its energy from a mix of sources similar to Michigan’s) saw a 20 percent rise.

For just 2000-2003, Michigan’s total emissions fell several points, even as they shot up in every other Midwestern state.

But the price of winning the anti-warming race was going into a recession first. Indeed, Michigan’s per-capita Gross Domestic Product ranking among the states fell from 16th in 1999 to 39th in 2006. And its unemployment rate was above 9 percent, highest in the nation, even before Detroit’s latest woes. (It’s among the top three population losers, too.)

The same story holds worldwide. Investor’s Business Daily reported recently that signatories to the Kyoto Climate Change Treaty are on track this year to cut their emissions 5 percent below 1990 levels. But the reason is that Russia and other Eastern European nations suffered economic collapse after the fall of communism.

If you exclude the ex-communist countries, Kyoto signatories’ greenhouse-gas emissions would now be 10 percent over 1990 levels.

So, as the global economy cools, emissions will drop. Deutsche Bank predicts that Europe’s industrial CO2 emissions will plummet 100 million tons next year. And our own Energy Information Administration forecasts a drop of one gigaton in US CO2 emissions by 2030 – the equivalent of doubling autofuel economy from 20 to 40 miles a gallon.

None of this will satisfy global-warming warriors. For them, Kyoto and the US Climate Security Act (which Congress voted down this summer) are just a downpayment in a much broader effort.

Problem is, it’s not just that the economic slowdown means a reduction in emissions – cutting emissions guarantees economic pain, too. Thus, the recession is causing many European countries to hop off the antiwarming bandwagon. Poland – whose economy, like America’s, is powered primarily by fossil fuels – staged a minor revolt at a European Union conference in Brussels last month. Joined by Italy, Hungary, Slovakia, Greece and a number of others, it demanded a slower approach to climate change. “We don’t think this is the moment to push forward on our own like Don Quixote,” declared Silvio Berlusconi, Italy’s prime minister.

Obama so far remains foursquare behind the warriors. “Now is the time to confront this challenge [warming] once and for all,” he insisted shortly after Election Day.

Not if he means to put the economy first, it isn’t. A study by Charles Rivers Associates, a private consulting group, found that imposing the Climate Security Act’s emission mandates would cause America’s GDP to shrink 2.3 percent by 2015 – and that was before the subprime meltdown. Demanding deeper cuts now would be like tying a lead weight to the back of a drowning man.

Obama can’t both fix the economy and the earth’s thermostat. Outside of the fantasy world of eco-warriors, there is no way (at least not now) to grow an economy out of global warming. The only places that have successfully cut emissions are those that have suffered economic downturns.

This may change – after we develop some cheap carbon-capture technology or clean-burning alternative-energy sources. Until then, though, the two goals will remain profoundly incompatible.

So Obama will have to decide which promise to break – stop warming, or fix the economy. He should bear in mind that voters are far more likely to forgive rising emissions than plunging 401(k)s.