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How to Make Decarbonization Economically Sustainable

This year's energy price volatility offers a painful reminder of what the transition to a net-zero-emissions economy entails. For the effort to succeed, countries at all levels of development will have to be brought along, which means that the world will need to do much more to manage energy supply.

LONDON – With all eyes on the United Nations Climate Change Conference (COP26) in Glasgow this month, there has been ample media coverage of youth protests, high-level diplomacy, and new agreements to reduce methane and protect the world’s forests. But no task is more important than making decarbonization compatible with efforts to foster economic development in neglected parts of the world. If developing economies – and lower-income people in developed economies – are not brought along, global climate targets will remain out of reach.

Reading recent commentaries on this topic, I have found myself reminiscing about the oil crises of the 1970s, which I studied closely as part of my PhD. Among the most stimulating analyses is a policy brief for the Peterson Institute for International Economics by my good friend Jean Pisani-Ferry, who argues that “Climate policy is macroeconomic policy, and the implications will be significant.” He, too, sees many comparisons – as well as key contrasts – to the 1970s oil shock.

I have written before about my PhD experience when offering predictions of what might happen to crude-oil prices. I reflect often on those lonely, uncertain three years, because while I was fortunate to be able to undertake such a project, I sometimes suspect that mine was not as worthy as others. Not only did I have extremely poor data to work with, but it was also hard to prove anything. Still, in addition to testing my capacity for independent thought, I learned an invaluable lesson: Never trust anyone when it comes to forecasting oil prices.

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