PIK’s (Naive) New Deal – Based On A “State-Of-The-Art Model Of Climate Economics”

A New Growth Path for Europe – Generating Prosperity and Jobs in the Low Carbon Economy”

Tipping point to prosperity at 30%

The PIK seems to be claiming there is an economic tipping point to prosperity at 30% emissions reduction. The onlineDie Zeit writes on the new PIK report:

Europe should reduce its greenhouse gas emissions by 30% instead of only 20% by 2020, which is the current plan. This is how the continent could overcome its economic stagnation.

If they stick to the 20% target, ‘then it would be like someone stuck in a hole who is digging deeper’.”

Based on climate-economic models!

The PIK claims a 30% reduction by 2020 would lead to higher growth and increased employment. These projections are based on “new model results”. (PIK models have an incurable habit of producing exactly what the PIK wants to see).

In the coming decade, Europe will need to accept the challenge of increasing economic growth while reducing both unemployment and greenhouse gas emissions. New model results show that these three goals can actually reinforce one another.”

Yet, there must be something terribly wrong with their models because a slew of European governments have been recently forced to do just the exact opposite, due real-life economics, and scale back subsidies to money-losing  green energy sources – especially solar.

But the PIK has never been deterred by the harsh truths of reality, and claims:

Clear policies associated with a decisive move to a 30% target can be doubly beneficial for the climate and the EU economy.”

Their “new model results” also say their new plan would:

• increase the growth rate of the European economy by up to 0.6% per year.
• create up to 6 million additional jobs Europe-wide.
• boost European investments from 18% to up to 22% of GDP.
• increase European GDP by up to $842 billion (2004 dollars).
• increase GDP by up to 6% both in the old (EU15) and new (EU12) member states.”

For the first time in the academic modelling field

The above projections all sound so rosy. So just exactly what kind of brilliant mastermind plan did the PIK use to produce such rosy projections? (Hang on to your chair!):

For the first time in the academic climate modeling field, the present study has taken a state-of-the-art model of climate economics and enhanced it along those lines. The enhanced model includes:

• the fact that investments depend on subjective expectations, not on correct previsions of whatever future possibilities may arise.
• the fact that higher investments trigger higher learning-by-doing, thereby reducing unit costs.
• the resulting existence of different possible equilibria with different growth paths.

The new simulations show that 30% is achievable and can be economically beneficial by shifting the European Economy into a new, more advantageous equilibrium – a path of low-carbon growth.”

I don’t know about you, but I’d be a little wary of the “first-time in the academic climate modeling field” point, especially in a field as complex as economics. Thinking that these things work without glitches after just one tune-up sets a new standard in naiveness.

Apparently I’m not the only one who’s palm over face on this. Even Germany’s greenie Environment Minister Norbert Röttgen is not touching this with a 10-foot pole. According to Die Zeit:

Even Environment Minister Norbert Röttgen has placed little emphasis on the presentation of the new study: Instead of travellingng to Brussels himself, he sent his secretary Katherina Reiche.”

Like the old promises of government central planning, PIK’s plan is a roadmap to a disaster.