Energy Policy, Climate Change, and the Global Economy

Introduction: Climate Change and Economic Impact

Without question, climate change is having a profound impact on the global economy. Evidence is mounting with increasing intensity to suggest that the patterns of climate and weather are shifting, and that these shifts are likely the consequence of human-made hazards. In no small part, the negative impact of global industrialization is reaping considerable environmental consequences — and, by no small irony, these same consequences will have a direct impact on global industries. Most specifically, the rate of human energy consumption, with all its attendant financial costs, has increased exponentially in recent years. In light of the heating of our atmosphere, this consumption threatens only to increase with time.

According to Chinn (2013), "occurrences of summer temperatures more than 3 standard deviations above the mean, which were extremely rare before 1980, occurred an order of magnitude more frequently in the 2000s and covered between 4 percent and 13 percent of the world between 2006 and 2011" (p. 1). This is an alarming finding with respect to the heavy economic toll of rising energy prices.

The Peak Oil Crisis and Global Energy Demand

Though the pace of inflation in recent years has slowed modestly, the peak oil crisis threatens to magnify the impact of climate change. As Whipple (2013) warns, we are approaching a tipping point where the slowing of oil production — due to diminishing availability — will come into conflict with continually rising demand and consumption. As the lifeblood of the global economy, oil is a resource upon which we have become wholly dependent. As Whipple reports, "Production from existing oil fields is declining by 4–5 percent annually and demand is increasing by about a million barrels per day each year. To keep the lid on costs, the world will have to come up with 5 million b/d of new oil production each year for the foreseeable future" (p. 1).

This means that we are facing a danger of catastrophic economic collapse on a global scale as oil becomes increasingly scarce. The best way, therefore, for nations to improve their energy security — and for the global community to do the same — is to find ways of moving toward innovative and sustainable energy production methods. For generations, wealthy industrial nations such as the United States have resisted the need for such innovation because oil production has represented such a critical part of their economic structure. This resistance, however, is substantially to blame for the current crisis of both environment and economy.

Conclusion: Toward a Sustainable Energy Economy

Because developing nations are less resistant and far less entrenched in corporate interests than are developed nations, they may actually be in a better position to lead the way to a sustainable energy economy. The evidence reviewed here — from accelerating climate change to declining oil reserves to shifting investment patterns — points to an urgent need for all nations, particularly wealthy industrialized ones, to overcome political and economic inertia and commit to meaningful renewable energy transitions before the costs of inaction become irreversible.