I just attended a seminar on the effect a cap on greenhouse gas emissions would have on population dynamics. Here’s the abstract:
Imposition of a cap on greenhouse gas emissions changes the economy’s growth path and causes total emissions to become a fixed common-property resource. Because total emissions equal population times emissions per person, a marginal birth under a cap reduces emissions per person, in turn reducing living standards. The implied negative population externality causes the optimal population to be less than the population that would arise naturally. The population externality is substantial in some simulations.
The paper is written by Henning Bohn and Charles Stuart, both at the Department of Economics, University of California at Santa Barbara; Charles Stuart was the presenter.
One very interesting finding in the paper is that, given that productivity of both labor and emissions may grow,* the population declines in the steady state whenever the growth rate of labor productivity is higher than that of emission productivity. That is, emissions cannot grow, and while labor productivity grows faster than emission productivity, fewer and fewer people are required to participate in the production process. The result may seem absurd or paradoxical: The presumed motivation for capping emission is to save the environment and have a livable climate, but the cap implies a population decline. A declining human population would in the long run mean that humans go extinct. In other words, we have a choice when it comes to greenhouse gas emissions: Keep emitting, destroy the environment, and go extinct fast on a dry, hot, and hostile planet; taking the global eco-system, as we know it, with us. Or, cap emissions, save the environment, and go extinct slowly in a gradually improving and more and more friendly and fertile environment. (For the record, Stuart did not put any emphasis on this aspect of his results.)
We had a short discussion about the apparent paradoxical result, and thinking about the discussion afterward, I came up with an alternative interpretation. The alternative interpretation is that we know we need to cap emissions, but at the same time we need to improve on the productivity growth of emissions to accomodate a seemingly inevitable increase in the population. Personally, I think the second interpretation is more valuable than the first. (The model of Bohn and Stuart imposes an optimal tax to control the population according to the limitation an emission cap introduces. In the model, it wouldn’t be necessary to worry about an increasing population when the cap is enforced, but in the real world, we know things aren’t quite like that. The point is, even if it did, we still would need to improve the productivity of emissions, and even more so in an imperfect world.)
* The model is quite simple and stylistic and abstracts from a lot of stuff (the harmful effect of emissions, for example): The production function only incorporates labor and emissions; exchange emissions for capital and you got the simplest standard production function. Whether it makes sense to put emissions into the production function like that, I’m not sure.