Devastating storms like Sandy last fall are increasing in number, and unemployment remains dangerously high. Hurricanes and unemployment are parts of two different, dangerous trends. But there's a connection.
On the economic front, the U.S. economy is stuttering and fragile -- roughly 20 million people are unemployed or want more work than they can find, and investment is hesitant. Europe, for its part, is in a crippling recession.
On the climate front, the increased frequency of severe storms and weather-related disasters is driven in part by global carbon emissions, which are rising sharply. We are heading rapidly toward a series of irreversible, adverse consequences including more destructive storms, severe droughts, reduced agricultural yield, decreased availability of water, and hundreds of millions of "climate refugees."
Both challenges demand vigorous responses on a large-scale that can show results fast. And one program can both help create jobs on one hand and avoid frying the planet on the other.
That single answer is a program that stimulates growth and creates jobs by investing large-scale funds in energy efficiency, retrofitting buildings around the world in order to level off carbon emissions. More carbon emissions come from buildings than from any other source if you count both the structures themselves and the power stations that send them electricity for heating, cooling and operating. Converting built space to low-carbon emissions and stepping up energy efficiency in the industrial, transportation and agricultural sectors is a long-term, job-intensive activity that makes the economy more efficient and more competitive over the long run.
Though most countries are trying to reduce their borrowing, there is a group that could finance such a program. It's the International Financial Institutions: the World Bank Group and its sister development banks such as the Asian Development Bank, the African Development Bank, the European Investment Bank and others.
The investment program must be global and large, and cover both the faltering economies of the north and the emerging markets of the south, such as China and India. Evenhanded treatment of all the large economies would be a politically attractive feature, reflecting the fact that we're all in this together. The program would help national governments launch extensive retrofitting of buildings with energy-saving improvements and appliances, and lend money to businesses to make them more energy efficient.
How much would it cost? At least $1 trillion for the first round. The word "trillion" makes people's eyeballs spin, so let's put this in perspective. The global gross product was roughly $70 trillion in 2012. So $1 trillion is about 1.5 percent of that amount. If our planet were a family earning $70,000 per year, that would mean devoting about $1,000 to this new investment.
And the IFIs enjoy leverage. That is, the entities that fund them -- the sovereign nations of the world -- contribute only about 10 to 12 percent of the total amount the IFIs then borrow in the capital markets. It's as if our family's neighborhood bank required them to come up with $100 in collateral to lend them that $1,000 for their investment.
The U.S. share of the hard cash needed to finance the $1 trillion investment -- say 20 percent, or $200 billion -- would be on the order of $20 billion. That's about 1/2 of 1 percent of the federal budget, and eminently affordable. Is taking on new debt a smart way to help move out of a global recession? You bet. It uses credit and borrowing power to generate new funds to generate growth. The trick is to make sure those funds are invested in something that actually creates new jobs and makes the economy more efficient. And low-carbon high-efficiency investments do just that.
There is a way forward here -- if we can seize it.