World Economic Forum: Gas Prices Must Go Higher to Save Democracy

World Economic Forum Paper: Gas Prices Must Go Higher to Save Democracy Charlie McCarthy 11 July 2022

A sign of the World Economic Forum

The World Economic Forum (WEF) on Monday released a position paper that said lowering fossil fuel use to reduce carbon emissions was necessary as the world faces two global crises — “climate change and the decline of democracy.”

The WEF’s paper, written by Colorado State University economics professor Edward B. Barbier, said democracy can be saved as long as consumers stop burning coal, oil, and gas in exchange for green renewables.

“If global warming is to be kept below 1.5o C, the world must act now to reduce carbon emissions. Achieving this objective requires substantially lowering fossil fuel use through a clean energy transition,” Barbier wrote.

“For the past 15 years, democracy has been in decline worldwide. To protect and promote freedom, leading democracies must strengthen their economies and safeguard liberty.

“These two aims are not mutually exclusive but complementary. Reducing reliance on fossil fuels and transitioning to low-carbon alternatives also make democratic economies more sustainable. Major democracies should work together to achieve these two goals.”

Higher gas prices would help the U.S. and Europe accomplish what Barbier suggested.

“First, leading democracies should agree to end the underpricing of fossil fuels, which is the principal factor preventing a clean energy transition,” Barbier wrote. “The underpricing associated with producing and burning coal, oil and gas amounted to $5.9 trillion in economic costs in 2020. Nearly a quarter of these losses — $1.45 trillion — occurred in 48 major and smaller democracies.

“The leading democracies of the G-20 should collectively commit to phasing out cost and tax breaks for the production and consumption of fossil fuels. They should also phase in more efficient pricing of fossil fuels through taxes or tradable permits to cover the costs of local air pollution, global warming, and other economic damages.”

The WEF paper said that a clean-energy transition led by major economies is essential for attaining net-zero carbon emissions by 2050.

Also, the WEF paper said, sacrificing further progress toward a low-carbon economy could “put democracies in greater economic peril, not less” — something to which Russia’s invasion of Ukraine has brought renewed focus.

Barbier wrote that a green strategy implemented by the U.S. and European powers should include three key elements:

  • End the underpricing of fossil fuels.
  • Adopt a carbon border adjustment mechanism (CBAM) that imposes a tax on carbon-intensive imports.
  • Recycle the revenues saved or raised through reforming fossil fuel markets to fund additional green innovation, investments, and protection.
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