Popular in Social Sciences

Books

City Time: On Being Sentenced to Rikers Island

Independent Scholar David A. Campbell

Culture and Society

The City as a Growth Machine: Toward a Political Economy of Place

New York University Harvey Moltoch

Economics

Gender and Economics

University of California Santa Barbara Shelly Lundberg

American Politics

Keeping the Republic

Boston College Marc Landy

Banks and Policy Organisations

Greening the financial sector

European Investment Bank Matteo Ferrazzi

British Politics

Entrepreneurial thinking: the politics and practice of policy impact

University of Sheffield Matthew Flinders

Culture and Society

Carceral Entrapments: Views from the Prison/Street Interface in India

Indian Institute of Technology Delhi Mahuya Bandyopadhya

Sustainable Green Growth

View more insights in Social Sciences - Economics - Macroeconomics

View more figures from Durham University

View the page of Parantap Basu

Read the Study

Parantap Basu argues that a sustainable green growth is possible if the government efficiently combines carbon tax, pollution abatement and replenishment of green resources.

Image courtesy of interviewee. March 6, 2024

Generating Workspace

Export as PDF

This video video discusses the problem of fossil fuel consumption and environmental impact, presenting two key aspects: the "doom hypothesis" and the concept of negative externalities. The "doom hypothesis" suggests that society is destined to run out of oil due to peak production, a view the speaker disagrees with, arguing that innovation will continue to find and develop fossil fuel resources.

Instead, the more pressing issue highlighted is the negative externalities—environmental pollution from fossil fuel usage, which leads to greenhouse gas emissions and various adverse effects on the environment and public health. The speaker argues for the need for government intervention to address these externalities, primarily through carbon taxes and pollution abatement technologies.

The paper suggests that a balanced approach between fossil fuels and renewable energy ("green capital" vs. "dirty capital") is necessary for sustainable growth, proposing a multipronged strategy involving effective policies and instruments. The aim is to achieve a socially optimal mix of energy sources that maximizes intergenerational welfare, acknowledging that an abrupt transition to complete renewable energy is impractical.

This video video emphasizes the importance of government action in implementing these policies, advocating for a benevolent government that resists pressure from vested interests to achieve a healthier balance between economic growth and environmental sustainability. Overall, the proposed framework involves optimizing carbon taxes, enhancing pollution control technologies, and integrating recycling initiatives to promote a sustainable economic future while mitigating environmental harm.

Language:

Export as PDF

X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

00:00.055 --> 00:01.925
There are two aspects of this problem.

00:02.355 --> 00:04.365
Okay, lemme try to answer in two parts.

00:04.775 --> 00:09.325
First aspect is what?

00:09.485 --> 00:12.365
I give it a name. I give it a name. Doom hypothesis.

00:12.995 --> 00:14.885
Doom hypothesis being that we are all doomed

00:14.885 --> 00:16.645
because we'll run out of oil

00:17.075 --> 00:20.165
that is actually building on this,

00:21.215 --> 00:23.985
peak hypothesis that we are already at the,

00:24.215 --> 00:25.465
peak of oil production.

00:26.285 --> 00:30.265
And, if we con consume

00:30.265 --> 00:32.945
and use more oil, eventually we'll run out.

00:33.405 --> 00:35.025
And then there is a huge problem.

00:37.865 --> 00:41.185
I don't particularly subscribe to this view, I don't think,

00:42.045 --> 00:44.865
this is a really a, a serious problem.

00:45.015 --> 00:47.345
It's a misplaced fear. Why?

00:47.575 --> 00:51.345
Because we are constantly innovating, okay?

00:51.685 --> 00:56.265
We are innovating constantly to, have deeper

00:56.485 --> 00:59.945
and more difficult deposits of fossil fuels.

01:01.165 --> 01:03.745
And there will be constant innovations

01:03.745 --> 01:05.865
that there will be always incentives to do so

01:07.095 --> 01:10.825
therefore, I don't subscribe to this peak oil supply

01:11.385 --> 01:13.545
hypothesis, which I call doom hypothesis.

01:14.295 --> 01:15.985
Therefore, that's not going to happen.

01:16.725 --> 01:19.105
But there is another aspect

01:19.105 --> 01:21.785
of the problem which is potentially more serious.

01:22.765 --> 01:26.315
The problem is what we call

01:26.935 --> 01:30.275
in economics, negative externally

01:31.465 --> 01:35.795
inflicted by private producers who use fossil fuel

01:36.345 --> 01:37.675
intensive resources.

01:38.415 --> 01:42.145
As you know that if you use more

01:42.145 --> 01:44.385
and more fossil fuel, what you do,

01:44.645 --> 01:46.065
you pollute the environment,

01:46.565 --> 01:49.945
it produces greenhouse gas emissions.

01:50.765 --> 01:54.345
And this pollution has many,

01:54.455 --> 01:57.015
many adverse effects.

01:58.995 --> 02:02.935
So basically, this fossil fuel goes

02:02.955 --> 02:05.015
to the sky burn fossil fuel.

02:05.155 --> 02:09.175
It mixes with rain, it makes carbonic acid,

02:09.515 --> 02:12.735
it acid rain, it adver it has adverse effect on soil

02:12.955 --> 02:16.455
and creatures like worm, which aired the soil.

02:17.195 --> 02:21.825
And, there are adverse effects on the quality

02:21.925 --> 02:22.945
of food health.

02:23.935 --> 02:26.105
It's a big mess, and it's already happening

02:26.765 --> 02:28.945
in different countries in different degrees.

02:30.325 --> 02:33.705
But this is what we call negative externality

02:35.015 --> 02:39.385
because private producers, they do not

02:39.945 --> 02:44.415
internalize the cost of emission

02:45.065 --> 02:47.835
they produce with a profit motive,

02:48.295 --> 02:51.275
and they don't care how much pollution

02:52.055 --> 02:55.735
is released in the environment.

02:56.475 --> 03:00.085
So this is exactly where, where government needs

03:00.085 --> 03:04.885
to do something and there must be some policy instruments.

03:04.985 --> 03:08.965
And the conventional policy instrument is carbon tax.

03:09.825 --> 03:12.725
You got to pay for this emission

03:12.725 --> 03:14.605
that you are, releasing.

03:15.665 --> 03:18.045
But carbon tax alone cannot do this.

03:18.625 --> 03:22.835
And our research is basically focusing

03:23.255 --> 03:24.355
on two instruments.

03:25.095 --> 03:29.155
One is the carbon tax and the other is polluted abbit.

03:29.265 --> 03:32.555
This research I've been doing with the ach

03:33.845 --> 03:37.315
Jamas B, he's at the Copenhagen School of Energy

03:37.335 --> 03:40.755
and Environment and also work.

03:40.785 --> 03:43.675
I've started with Annu Palmen at the Smith School

03:44.295 --> 03:46.995
of Enterprise in Oxford University.

03:47.735 --> 03:51.075
So basically the answer to that, that the growth is possible

03:52.395 --> 03:53.935
and we are not going to run out

03:54.835 --> 03:57.975
of exhaustible resources if we manage it.

03:57.975 --> 04:01.495
Well. There are two kinds of resources, green resources

04:02.115 --> 04:05.425
and what we call dirty resource

04:06.305 --> 04:07.945
resources like convention.

04:07.945 --> 04:09.065
These are called clean capital

04:09.085 --> 04:11.265
and dirty capital, clean capitalists, green

04:11.645 --> 04:14.265
and dirty capitalists, fossil fuel intensive.

04:14.845 --> 04:19.665
It produces carbon in the environment.

04:20.085 --> 04:21.945
So what we need to do is to manage,

04:22.125 --> 04:25.985
and there are two groups of thinkers.

04:27.575 --> 04:29.395
One group is taking an extreme stand

04:30.095 --> 04:31.155
and they're taking that.

04:31.155 --> 04:32.315
We can't combine them.

04:32.575 --> 04:35.275
You have to just go clean, completely clean,

04:36.015 --> 04:37.355
get rid of fossil fuel energy.

04:37.355 --> 04:38.555
That's not very practical.

04:39.185 --> 04:41.675
This group is called strong, strong sustainability.

04:42.055 --> 04:45.515
And the other group, like, led by Robert Solo

04:46.055 --> 04:50.035
and Nor House, they're, they're taking about practical

04:50.455 --> 04:52.835
and pragmatic position that we have

04:52.835 --> 04:55.795
to have the proper combination of

04:57.945 --> 04:59.535
dirty and clean capital.

04:59.915 --> 05:02.335
And that combination has to be determined

05:02.335 --> 05:05.295
by a social planner, which will make the society happy.

05:06.075 --> 05:08.375
And in order to arrive at that particular combination,

05:08.395 --> 05:09.495
we need instruments.

05:09.875 --> 05:13.095
And this one instrument, major instrument is carbon tax.

05:13.445 --> 05:15.215
This I've been doing for quite some time.

05:15.675 --> 05:17.455
And in addition to that, you have to manage

05:17.555 --> 05:19.175
by having pollution.

05:19.635 --> 05:23.695
Uh, abatement technology written industrial policy has

05:23.695 --> 05:26.175
to be seen in a

05:27.065 --> 05:30.975
broad institutional surrounding, which involves

05:31.775 --> 05:33.415
140 countries, okay?

05:33.845 --> 05:35.375
Many countries are involved.

05:36.155 --> 05:38.015
And, there is

05:40.525 --> 05:42.985
intergovernmental panel on climate change,

05:43.005 --> 05:44.385
as you know, called IPCC.

05:45.165 --> 05:48.945
And this started limiting global warm

05:48.945 --> 05:51.345
to 1.5 degrees Celsius to,

05:57.985 --> 06:00.885
and we have to have this net zero target.

06:01.105 --> 06:02.965
Net zero has to be understood properly.

06:03.105 --> 06:05.485
Net zero target doesn't mean zero carbon,

06:05.985 --> 06:07.805
it basically means carbon

06:09.275 --> 06:11.255
in must balance carbon out.

06:11.685 --> 06:14.655
Okay? So that is the meaning of net zero.

06:15.155 --> 06:18.135
So in this context, UCAS

06:18.885 --> 06:23.185
10 point industrial policy is quite gigantic.

06:23.325 --> 06:24.505
It has many features,

06:24.965 --> 06:28.145
but I'm going to only focus on the,

06:29.625 --> 06:32.565
features which involved environment.

06:33.105 --> 06:37.735
The basic principle of the EU industrial policy state,

06:37.735 --> 06:39.295
you have to remove policy barriers

06:40.925 --> 06:44.585
to infrastructural investment, in renewable,

06:45.985 --> 06:48.905
mobilize, private sector investment into priority ideas,

06:49.335 --> 06:50.745
promoting debt, zero target.

06:51.725 --> 06:55.905
And also we can't forget that we need to have growth

06:57.495 --> 07:00.555
of GDP and growth of jobs.

07:01.655 --> 07:05.715
So we have to have a renewable climate where,

07:05.925 --> 07:08.955
which will harness growth, which will create employment.

07:10.045 --> 07:14.355
So that these are the basic, highlights

07:14.895 --> 07:17.275
of UK's industrial policy.

07:17.625 --> 07:21.755
This particular paper with ura Jamasbi have been working

07:22.215 --> 07:25.275
for nearly more than three years now.

07:25.695 --> 07:27.075
And I presented in many places,

07:27.175 --> 07:28.515
it is already a working paper.

07:28.895 --> 07:32.755
Uh, you can see that, it's called sustainable growth,

07:33.535 --> 07:34.715
with green capital.

07:36.495 --> 07:40.835
The basic idea of this paper is that as I told you

07:41.805 --> 07:45.185
to have a pragmatic policy of industrialization.

07:46.165 --> 07:50.145
By that I mean that I, we need to have some kind of a,

07:51.165 --> 07:55.955
in instrument to arrive at a socially optimal

07:56.605 --> 08:00.475
ratio of green to dirty capital.

08:01.465 --> 08:03.205
We don't want to have an environment

08:03.205 --> 08:04.525
where we completely get rid

08:04.525 --> 08:06.525
of fossil fuel intensive resources

08:06.865 --> 08:08.965
and have all renewable, all green.

08:09.315 --> 08:12.365
That is eventually the goal, but that's not going to happen.

08:12.825 --> 08:17.285
So what we need, we need to have a socially optimal

08:17.855 --> 08:20.695
ratio of green to dirty capital.

08:22.725 --> 08:25.905
And what is meant by socially optimal, by social ality,

08:26.105 --> 08:28.025
I mean this particular green

08:28.225 --> 08:32.025
to dirty capital will maximize intergenerational welfare.

08:32.405 --> 08:33.905
Not only our welfare,

08:34.485 --> 08:36.745
but also our future generation welfare,

08:37.095 --> 08:40.265
because we all know that we can't just get rid

08:40.265 --> 08:42.225
of fossil fuel overnight.

08:42.605 --> 08:45.945
And therefore if we do that, some

08:45.945 --> 08:48.145
of these renewable technology immediately

08:48.145 --> 08:49.385
could be quite expensive.

08:49.965 --> 08:52.705
As a result, we might have joblessness.

08:53.085 --> 08:54.425
So we have to have a balance

08:54.885 --> 08:57.645
and doing so we'll get a ratio of

08:58.175 --> 08:59.965
green capital to dirty capital.

09:00.585 --> 09:03.205
And then in order to arrive at that ratio,

09:03.305 --> 09:04.405
we need two instruments.

09:04.985 --> 09:08.725
One is the carbon tax, meaning that we tax

09:09.785 --> 09:13.725
the producers, producers, were polluting the environment

09:16.525 --> 09:19.305
in a proper way so that you see that in congested areas

09:19.355 --> 09:21.105
where vulnerable areas

09:21.105 --> 09:23.185
where there's already too much carbon.

09:23.525 --> 09:26.145
We, we want the them to pay more

09:26.805 --> 09:30.825
and maybe we can divert their production to areas where,

09:30.825 --> 09:32.865
there is not that much pollution.

09:33.085 --> 09:35.265
That's one thing. And the second is

09:35.645 --> 09:37.185
to have pollution abatement.

09:37.775 --> 09:41.585
Pollution abatement basically means we have to,

09:41.995 --> 09:46.145
lower the pollution by different means.

09:46.725 --> 09:49.225
And one of them is this carbon capture,

09:49.735 --> 09:52.345
this carbon capture and news.

09:52.615 --> 09:54.545
This is known as CCUS.

09:54.845 --> 09:57.665
People are doing this quite a bit In our paper,

09:58.525 --> 10:02.345
we have a model where we find an optimal carbon tax,

10:03.555 --> 10:07.255
which will, which will give rise to

10:08.115 --> 10:11.495
net zero target, which will fulfill our net zero target

10:11.995 --> 10:15.735
target via this pollution abatement technology.

10:16.085 --> 10:18.255
Okay? And that's what we are doing in this paper.

10:19.395 --> 10:21.695
And in another related paper with Palmer,

10:21.995 --> 10:24.415
we are also bringing another instrument that's called

10:25.125 --> 10:27.575
recycling, recycling of goods.

10:27.635 --> 10:30.655
And that's another way to sort of,

10:30.805 --> 10:33.455
this is actually kind of a ramification

10:33.455 --> 10:35.535
of CCUS carbon capture and usage.

10:35.535 --> 10:38.695
But there, but also there are other aspects like you throw

10:38.725 --> 10:41.895
away things, we throw plastics and we have recycled them

10:42.115 --> 10:43.895
and put this back in the production process.

10:44.435 --> 10:46.935
And this paper is,

10:48.115 --> 10:49.495
is at a preliminary stage.

10:49.515 --> 10:51.375
We are working quite intensively.

10:51.755 --> 10:55.495
So these are the two papers which contribute to,

10:55.875 --> 10:57.135
this literature.

10:57.315 --> 11:00.015
The mechanism as I, I just give, give you a hint,

11:00.075 --> 11:03.255
the mechanism is that we first solve

11:04.055 --> 11:06.295
a fictitious social planning problem.

11:06.795 --> 11:08.695
You don't see a social planner like that.

11:09.035 --> 11:11.695
But suppose there is a benevolent social planner

11:12.795 --> 11:16.025
who cares about not only current generation,

11:16.285 --> 11:18.065
but also future generation soil.

11:18.645 --> 11:20.505
But we give, we do some discounting.

11:20.505 --> 11:23.585
Of course, how much discounting will be done will be done

11:23.585 --> 11:25.025
to the future generation welfare.

11:25.405 --> 11:27.025
That's a policy question.

11:27.175 --> 11:28.425
Some people say

11:28.425 --> 11:31.145
that we should not discount at all future generations

11:31.145 --> 11:33.265
welfare, but that all can be accommodated.

11:33.285 --> 11:35.825
In our model, we have a dynamic model,

11:35.925 --> 11:40.425
and from there we derive a condition, which we call

11:41.305 --> 11:45.985
a efficiency condition, which will determine

11:47.315 --> 11:50.055
the efficient proportion of

11:50.905 --> 11:52.615
green to capital.

11:53.795 --> 11:57.545
That proportion social planner is mandating,

11:58.005 --> 12:01.385
the social planner is saying this is the right proportion.

12:02.155 --> 12:05.625
After this, we consider a decentralized economy.

12:06.085 --> 12:09.385
Social planning, planning economy is a centralized economy,

12:09.765 --> 12:11.945
but the planner is benevolent.

12:12.325 --> 12:14.585
But then we considerate decentralized economy

12:14.835 --> 12:17.345
where you have producers, we have consumers,

12:17.485 --> 12:20.905
we have government, and then the government takes the role

12:21.805 --> 12:26.745
of taxing the polluters and that taxes the carbon tax

12:27.005 --> 12:30.145
and the government taxes these polluters

12:30.685 --> 12:35.265
and use the tax revenues to replenish the environment.

12:35.565 --> 12:36.705
That's public investment.

12:37.565 --> 12:41.585
And government also uses that, that tax proceeds

12:41.845 --> 12:44.265
for the investment in pollution habit.

12:45.315 --> 12:47.185
There are, these are the instruments, right?

12:47.925 --> 12:51.425
So replenish, replenishing environment, then

12:52.745 --> 12:54.035
abatement of politician

12:54.415 --> 12:56.435
and doing so government

12:58.765 --> 13:02.645
materializes this ratio of green

13:02.825 --> 13:06.485
to opt dirty capital, which will make the society happy.

13:06.785 --> 13:09.925
Not only us, but also our future generation.

13:10.825 --> 13:12.325
So that is the basic idea.

13:12.745 --> 13:15.725
And the simulation is showing that if you,

13:16.705 --> 13:19.885
if you have more emission, then you have

13:19.885 --> 13:21.005
to pay more carbon tax.

13:21.025 --> 13:22.245
The carbon tax will be higher.

13:22.425 --> 13:24.845
But if the carbon tax is higher, it has a side effect

13:25.145 --> 13:27.285
as a result of that growth will be lower

13:27.285 --> 13:31.925
because producers will be disincentivized

13:32.545 --> 13:35.685
to produce more and the growth will be lower.

13:35.705 --> 13:37.405
But that's still okay for the society.

13:37.425 --> 13:40.245
We don't want too much growth and a bad environment.

13:40.465 --> 13:42.205
So we have to have the right balance and

13:42.205 --> 13:44.685
therefore there will be some negative effect on growth.

13:45.625 --> 13:48.565
And that way we can have an optimal carbon tax,

13:48.565 --> 13:50.605
which gives us an optimal growth,

13:50.975 --> 13:52.725
which makes the society happy.

13:53.385 --> 13:56.085
But this tax alone, as I said,

13:56.665 --> 14:00.955
cannot completely eliminate carbon retract.

14:01.015 --> 14:02.155
I'm not saying zero carbon.

14:02.375 --> 14:06.195
I'm, I'm, I'm saying that it's not going to,

14:06.485 --> 14:10.995
bring us net zero carbon economy for that.

14:10.995 --> 14:12.355
We need additional distribute.

14:12.695 --> 14:15.675
And for that we need a pollution abatement technology.

14:16.215 --> 14:18.595
And that's the second part of the paper.

14:18.905 --> 14:23.395
When you show exactly how with a combination of carbon tax

14:23.735 --> 14:27.555
and pollution abatement, we can make the society happy.

14:28.735 --> 14:31.835
And our simulation experiment shows that as a result of

14:31.835 --> 14:34.795
that, if you have a more efficient pollution abatement,

14:35.145 --> 14:38.155
then growth will be higher, carbon tax will be lower,

14:39.055 --> 14:41.475
and welfare in the economy will be higher.

14:41.535 --> 14:43.195
That's our simulation result.

14:43.375 --> 14:46.475
The policy implication is that the government, in order

14:46.575 --> 14:48.195
to materialize this goal,

14:48.295 --> 14:50.555
the government has to be benevolent

14:51.185 --> 14:55.805
And government should not be, should not be subject

14:55.825 --> 14:59.565
to pressure from vested interest business, right?

15:00.065 --> 15:04.225
And if it is needed, they have to impose the right,

15:04.225 --> 15:06.745
carbon tax, they have to implement policy.

15:07.365 --> 15:12.025
And there is already a lot of conflict about this produce.

15:12.155 --> 15:14.465
There are many producers who do not want to

15:15.235 --> 15:19.025
shift from fossil, fulfill fuel intensive, technology

15:19.485 --> 15:20.585
to a green technology.

15:21.535 --> 15:23.105
Even if it is possible.

15:23.105 --> 15:24.185
They don't want to do that

15:24.415 --> 15:27.665
because that is going to hurt their profit in the short run.

15:28.045 --> 15:31.705
So government has to stake an aggressive stat

15:32.625 --> 15:34.285
to implement this policy.

15:35.225 --> 15:37.205
And for this, we need a be government.

00:00 - There are two aspects of this problem. Okay, lemme try to answer in two parts. First aspect is what? I give it a name. I give it a name. Doom hypothesis. Doom hypothesis being that we are all doomed because we'll run out of oil

00:17 - that is actually building on this, peak hypothesis that we are already at the, peak of oil production. And, if we con consume and use more oil, eventually we'll run out. And then there is a huge problem. I don't particularly subscribe to this view, I don't think, this is a really a, a serious problem. It's a misplaced fear. Why? Because we are constantly innovating, okay?

00:51 - We are innovating constantly to, have deeper and more difficult deposits of fossil fuels. And there will be constant innovations that there will be always incentives to do so therefore, I don't subscribe to this peak oil supply hypothesis, which I call doom hypothesis. Therefore, that's not going to happen. But there is another aspect of the problem which is potentially more serious. The problem is what we call

01:26 - in economics, negative externally inflicted by private producers who use fossil fuel intensive resources. As you know that if you use more and more fossil fuel, what you do, you pollute the environment, it produces greenhouse gas emissions. And this pollution has many, many adverse effects. So basically, this fossil fuel goes

02:02 - to the sky burn fossil fuel. It mixes with rain, it makes carbonic acid, it acid rain, it adver it has adverse effect on soil and creatures like worm, which aired the soil. And, there are adverse effects on the quality of food health. It's a big mess, and it's already happening in different countries in different degrees. But this is what we call negative externality because private producers, they do not

02:39 - internalize the cost of emission they produce with a profit motive, and they don't care how much pollution is released in the environment. So this is exactly where, where government needs to do something and there must be some policy instruments. And the conventional policy instrument is carbon tax. You got to pay for this emission that you are, releasing. But carbon tax alone cannot do this.

03:18 - And our research is basically focusing on two instruments. One is the carbon tax and the other is polluted abbit. This research I've been doing with the ach Jamas B, he's at the Copenhagen School of Energy and Environment and also work. I've started with Annu Palmen at the Smith School of Enterprise in Oxford University. So basically the answer to that, that the growth is possible and we are not going to run out

03:54 - of exhaustible resources if we manage it. Well. There are two kinds of resources, green resources and what we call dirty resource resources like convention. These are called clean capital and dirty capital, clean capitalists, green and dirty capitalists, fossil fuel intensive. It produces carbon in the environment. So what we need to do is to manage, and there are two groups of thinkers.

04:27 - One group is taking an extreme stand and they're taking that. We can't combine them. You have to just go clean, completely clean, get rid of fossil fuel energy. That's not very practical. This group is called strong, strong sustainability. And the other group, like, led by Robert Solo and Nor House, they're, they're taking about practical and pragmatic position that we have

04:52 - to have the proper combination of dirty and clean capital. And that combination has to be determined by a social planner, which will make the society happy. And in order to arrive at that particular combination, we need instruments. And this one instrument, major instrument is carbon tax. This I've been doing for quite some time. And in addition to that, you have to manage by having pollution.

05:19 - abatement technology written industrial policy has to be seen in a broad institutional surrounding, which involves 140 countries, okay? Many countries are involved. And, there is intergovernmental panel on climate change, as you know, called IPCC. And this started limiting global warm to 1.5 degrees Celsius to,

05:57 - and we have to have this net zero target. Net zero has to be understood properly. Net zero target doesn't mean zero carbon, it basically means carbon in must balance carbon out. Okay? So that is the meaning of net zero. So in this context, UCAS 10 point industrial policy is quite gigantic. It has many features, but I'm going to only focus on the,

06:29 - features which involved environment. The basic principle of the EU industrial policy state, you have to remove policy barriers to infrastructural investment, in renewable, mobilize, private sector investment into priority ideas, promoting debt, zero target. And also we can't forget that we need to have growth of GDP and growth of jobs. So we have to have a renewable climate where, which will harness growth, which will create employment.

07:10 - So that these are the basic, highlights of UK's industrial policy. This particular paper with ura Jamasbi have been working for nearly more than three years now. And I presented in many places, it is already a working paper. you can see that, it's called sustainable growth, with green capital. The basic idea of this paper is that as I told you to have a pragmatic policy of industrialization.

07:46 - By that I mean that I, we need to have some kind of a, in instrument to arrive at a socially optimal ratio of green to dirty capital. We don't want to have an environment where we completely get rid of fossil fuel intensive resources and have all renewable, all green. That is eventually the goal, but that's not going to happen. So what we need, we need to have a socially optimal ratio of green to dirty capital.

08:22 - And what is meant by socially optimal, by social ality, I mean this particular green to dirty capital will maximize intergenerational welfare. Not only our welfare, but also our future generation welfare, because we all know that we can't just get rid of fossil fuel overnight. And therefore if we do that, some of these renewable technology immediately could be quite expensive.

08:49 - As a result, we might have joblessness. So we have to have a balance and doing so we'll get a ratio of green capital to dirty capital. And then in order to arrive at that ratio, we need two instruments. One is the carbon tax, meaning that we tax the producers, producers, were polluting the environment in a proper way so that you see that in congested areas where vulnerable areas

09:21 - where there's already too much carbon. We, we want the them to pay more and maybe we can divert their production to areas where, there is not that much pollution. That's one thing. And the second is to have pollution abatement. Pollution abatement basically means we have to, lower the pollution by different means. And one of them is this carbon capture, this carbon capture and news.

09:52 - This is known as CCUS. People are doing this quite a bit In our paper, we have a model where we find an optimal carbon tax, which will, which will give rise to net zero target, which will fulfill our net zero target target via this pollution abatement technology. Okay? And that's what we are doing in this paper. And in another related paper with Palmer, we are also bringing another instrument that's called recycling, recycling of goods.

10:27 - And that's another way to sort of, this is actually kind of a ramification of CCUS carbon capture and usage. But there, but also there are other aspects like you throw away things, we throw plastics and we have recycled them and put this back in the production process. And this paper is, is at a preliminary stage. We are working quite intensively. So these are the two papers which contribute to,

10:55 - this literature. The mechanism as I, I just give, give you a hint, the mechanism is that we first solve a fictitious social planning problem. You don't see a social planner like that. But suppose there is a benevolent social planner who cares about not only current generation, but also future generation soil. But we give, we do some discounting. Of course, how much discounting will be done will be done

11:23 - to the future generation welfare. That's a policy question. Some people say that we should not discount at all future generations welfare, but that all can be accommodated. In our model, we have a dynamic model, and from there we derive a condition, which we call a efficiency condition, which will determine the efficient proportion of green to capital.

11:53 - That proportion social planner is mandating, the social planner is saying this is the right proportion. After this, we consider a decentralized economy. Social planning, planning economy is a centralized economy, but the planner is benevolent. But then we considerate decentralized economy where you have producers, we have consumers, we have government, and then the government takes the role of taxing the polluters and that taxes the carbon tax and the government taxes these polluters

12:30 - and use the tax revenues to replenish the environment. That's public investment. And government also uses that, that tax proceeds for the investment in pollution habit. There are, these are the instruments, right? So replenish, replenishing environment, then abatement of politician and doing so government materializes this ratio of green to opt dirty capital, which will make the society happy.

13:06 - Not only us, but also our future generation. So that is the basic idea. And the simulation is showing that if you, if you have more emission, then you have to pay more carbon tax. The carbon tax will be higher. But if the carbon tax is higher, it has a side effect as a result of that growth will be lower because producers will be disincentivized to produce more and the growth will be lower.

13:35 - But that's still okay for the society. We don't want too much growth and a bad environment. So we have to have the right balance and therefore there will be some negative effect on growth. And that way we can have an optimal carbon tax, which gives us an optimal growth, which makes the society happy. But this tax alone, as I said, cannot completely eliminate carbon retract. I'm not saying zero carbon.

14:02 - I'm, I'm, I'm saying that it's not going to, bring us net zero carbon economy for that. We need additional distribute. And for that we need a pollution abatement technology. And that's the second part of the paper. When you show exactly how with a combination of carbon tax and pollution abatement, we can make the society happy. And our simulation experiment shows that as a result of that, if you have a more efficient pollution abatement, then growth will be higher, carbon tax will be lower,

14:39 - and welfare in the economy will be higher. That's our simulation result. The policy implication is that the government, in order to materialize this goal, the government has to be benevolent And government should not be, should not be subject to pressure from vested interest business, right? And if it is needed, they have to impose the right, carbon tax, they have to implement policy. And there is already a lot of conflict about this produce.

15:12 - There are many producers who do not want to shift from fossil, fulfill fuel intensive, technology to a green technology. Even if it is possible. They don't want to do that because that is going to hurt their profit in the short run. So government has to stake an aggressive stat to implement this policy. And for this, we need a be government.

Faculti AI can make mistakes