Economic Impact of CO2 Policies

Economic Impact of CO2 Policies

Shouldn’t economists begin to evaluate the impact of CO2 climate policies?

Most attention is given to trade conflicts, especially between the US and China, with stock market swings attributed to the latest trade news.

But economic charts seem to point elsewhere.

The first two charts are from the Wall Street Journal, and they seem to indicate something besides trade is influencing economics. The EU curves both turned down at the end of 2017. While this was at the early stages of the trade differences, other events could also have been at work.

Graphs from WSJ August 3 and August 1 editions. It should be noted that the US PMI has fallen to around 48 since the chart was published.

The Euro Zone has been trending down since the beginning of 2018.

The next two charts show manufacturing growth in the US and in Germany.


(The scales are different so US growth is magnified when compared to Germany’s.) 

Three differences are apparent.

  • First, since 2018 the US economy has been trending up, while Germany’s economy has been trending down.
  • Second, German growth was anemic during all of 2016 and only bumped up in 2017.
  • Third, German manufacturing has been in decline since it peaked at the end of 2017, and went negative during the second half of 2018. 

German growth has been the laggard in the EU (1.4% in 2018) and Germany has taken the most extensive actions against CO2 emissions. Only Italy had lower GDP growth than Germany according to the World Bank.

The EU’s central bank has held rates at minus .05%, while the Fed, until recently, had increased rates during this period. In other words, Europe’s central bank has been trying to stimulate Europe’s economy while the Fed has been trying to reign in US growth.

Europe’s negative interest rate harms savings which hurts ordinary people.

An important difference between Europe and the United States has been the negative effects of Europe’s efforts to cut CO2 emissions.

Daimler Chief Executive Ola Källenius told investors:

The cost burdens to reach the targets on carbon-dioxide emissions require far-reaching measures to increase efficiency in every area of our company. This will weigh on our earnings in 2020 and 2021.”

While the US has been eliminating regulations, Europe has been increasing them.

These are merely observations, but shouldn’t economists evaluate the economic consequences of Europe’s actions for cutting CO2 emissions?

And wouldn’t the results be the same here if we established new regulations to cut CO2?

. . . 


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