The most contentious thing about climate change is not the science explaining its causes but rather the politics of what to do about it. Popular but polarizing personalities such as former Vice President Al Gore claim climate change is nothing short of a “planetary emergency” requiring a revolutionary response, comparable in magnitude to the abolition of slavery, the defeat of apartheid, and recognizing women and gay rights. Naomi Kline calls climate change an existential crisis in capitalism requiring transforming a failed economic system and building something radically different.[1]
Bob Ingles, a former congressman from one of the most conservative districts in one of the most conservative states, explains why this framing causes conservative republicans to deny climate change: the cure is worse than the disease. Many of the proposed solutions advocated by the likes of Gore and Kline would empower elitist experts, grow government, and regulate markets—prospects that disgust conservatives. Capping and trading greenhouse gasses, for example, requires technical experts to set caps and government bureaucracy to monitor emissions and redistribute monetary trades. Ingles likens this situation to you going to the doctor because of debilitating back pain and being told that the best medical treatment requires removing and re-attaching your head. Suddenly your back pain would become tolerable. Because the cure is perceived worse than the disease, you deny or learn to live with the disease. Advocates of freer markets and limited government therefore understandably question whether climate change is a real and serious problem. Hence, we find our political debate about climate easily paralyzed and distracted by the same merchants of doubt hired to delay societal response to cigarettes that cause cancer and chemicals that cause ozone holes and acid rain.[2]
One approach to more productive debate is to recognize the debate for what it is: a political discussion, not a scientific discussion, about what to do about climate change. As part of this reframing, we need to consider climate change just one of many possible changes shaping our future. A changing climate is not the only serious challenge we face and may not be more serious than poverty, nuclear explosions, war, inequality, global pandemics, crop failures, terrorism, or civil chaos. John Cochrane, the Grumpy Economist, argues climate change is not our most pressing challenge: “Healthy societies do not fall apart over slow, widely predicted, relatively small economic adjustments of the sort painted by climate analysis. Societies do fall apart from war, disease or chaos. Climate policy must compete with other long-term threats for always-scarce resources.”[3]
Deciding how to respond to climate change is, ultimately, a political debate about values. For better or worse, economic tools provide one of the best ways to discuss, assess, and predict human values—with all its limitations, money provides the most universal proxy for human value and economist try valiantly to monetize all kinds of value, including those external to market transactions such as human health and safety as well as biodiversity and aesthetics. So, to proceed with this reframing exercise, you will need to not just set aside questions about whether climate change is occurring but also set aside worries about money as a proxy for value and the arrogance of economists. That is, I’m asking you to assume, for a few more paragraphs, that climate is changing and economic valuation tools provide the reasonable estimates of the impact of that change. Obviously, this logic requires accepting lots of if, thens, and buts. But it is a logic that allows us to reframe the argument so we can see and consider the bigger question climate change poses for humanity. After you swallow those assumptions and objections, proceed to the next paragraph to dig a bit deeper into the economic impacts of climate change, starting with possible economic development scenarios.
IPCC, the global institution charged with leading research and policy on climate change, began promoting social science research on climate topics relatively recently (hence, the social science findings are less developed and have higher uncertainty than the earth science and meteorological aspects of climate change science). IPCC needed development scenarios so that we could consider how large climate impacts are relative to our wealth and ability to adapt to those impacts: will climate change be a small nuisance—causing me to give up one cup of Starbucks a year—or will it be a life-altering calamity—causing me to lose my home, health insurance, and retirement? To put it in simple monetary terms, this analysis estimates the global average income each person would receive each year if all the income in the world were evenly distributed. For reference, global average per person income was approximately $1000 in 1900 and $10,000 in 2000.[4]
In the Business-as-Usual scenario (SSP2; Blue in Figure 1, below), historical patterns continue. Economic growth proceeds unevenly but most nations’ economies remain politically stable. Global markets function imperfectly and progress on global environmental issues such as climate remains uneven. Under this scenario, per person income in 2100 would be around $60,000. Alternatively, under a high growth scenario (SSP5; purple), per person income would be around $100,000. That scenario assumes policy changes that promote global trade, more technology and innovation, greater investments in health, education, infrastructure and government capacity, and continuing fossil fuel intensive lifestyles. A “green” scenario (SSP1; green) produces the next highest average wealth: ~$80,000 by 2100. It assumes investment in programs that reduce pollution such as GHGs, address other environmental challenges such as water and biodiversity, and accelerates investments in building social capital with better educational, health care, and good governance. The lowest per person income (~$20,000) results from the Rivalry scenario (SSP3; red) where global free trade is restricted and countries invest more in national & regional security and invest less in education and technological development because of rising nationalism, competitiveness, & conflict. Also under this scenario, less international collaboration occurs on global commons issues such as ozone, climate, ocean fisheries, and human migration.[5]
Green: Development respects environmental boundaries & accelerates educational & health investments. BAU: Historical patterns continue. Econ growth proceeds unevenly. Most economies are politically stable. Global markets function imperfectly. Uneven progress on global environmental issues Rivalry: Nationalism, competitiveness, & conflict push countries to focus on national & regional security. Less investments in education & technological development. Grow: More of: global trade & free markets; technology & innovation; investments in health, education, infrastructure & govt.; fossil fuel energy intensive lifestyles. Dellink, R., et al. (2015). “Long-term economic growth projections in the Shared Socioeconomic Pathways.” Global environmental change. http://www.sciencedirect.com/science/article/pii/S0959378015000837
These scenarios help contextualize the impacts of climate change: we have more capacity to weather and adapt to climate change if we each earn $100,000 a year than if we earn only $20,000. But our wealth is not the only issue. We also need to understand the impacts of climate change because if climate impacts are large relative to income, we will be less able to afford food, shelter, education, and other necessities and hence suffer significant harm to quality of life. So, what are the projected economic impacts of climate change?
Nordhaus is perhaps the most recognized quantifier of economic impacts of climate change. In a recent review, he concludes that in the worst-case scenario climate impacts would be about 10% of total income: “the estimated impact is -2.04 (+ 2.21) % of income at 3 °C warming and -8.06 (+ 2.43) % of income at 6 °C warming. We also considered the likelihood of thresholds or sharp convexities in the damage function and found no evidence from the damage estimates of a sharp discontinuity or high convexity.”[6] These estimates of impact estimate many, but not all, currently unpriced impacts such as changes in ecosystem services and human health.
Allow me to use the words of the Grumpy Economist to summarize the economic logic in this argument: “To arrive at a wise policy response, we first need to consider how much economic damage climate change will do. Current models struggle to come up with economic costs commensurate with apocalyptic political rhetoric. Typical costs are well below 10% of gross domestic product in the year 2100 and beyond. That’s a lot of money—but it’s a lot of years, too. Even 10% less GDP in 100 years corresponds to 0.1 percentage point less annual GDP growth. Climate change therefore does not justify policies that cost more than 0.1 percentage point of growth.”
The Grumpy Economist goes on to argue that if our goal is to mitigate the impact of climate change and impacts are quantified in monetary terms, then policies that are “pro-growth tax, regulatory and entitlement reforms would be far more effective.” That is, if our goal is to create a future where people are the best off (where best off is measured using money as a surrogate for value), then we should seek to maximize wealth in the future and the best way to do that might be to grow the economy rather than dramatically reduce GHG emissions.
This framing and logic illustrates why climate change is so contentious. Some people believe we can grow our way out of the climate problem. They believe strong economic growth coupled with technological innovation will produce sufficient capacity to adapt to climate change when and if impacts threaten our wellbeing. For example, buildings and other infrastructure last only 50 years and can be rebuilt better and away from flood zones. Farms and farmers can relocate, as many did in the early 20th Century. GMO can make agriculture thrive in the new conditions. And so on. According to this logic, we need to be cautious of adopting climate change polices that unnecessarily slow economic growth and technological innovation, leaving millions if not billions in poverty and future generations significantly worse off than they would have been had we pursued economic growth. What will our grandchildren think of us if we denied them a better future? What would we think of our ancestors if they had not cleared forests, eroded soil, and polluted the air to build the transportation, agriculture, and energy systems upon which our economy grew and democracy thrived?
The purpose of this essay is to advance the discussion of climate change by unsticking it from the mire of denialism versus science and re-focusing the debate on core values about where we want to live in the future and how we want to create that future. Climate change is such a contentious political topic because it is intertwined and conflated with core values about free markets and the role of government. Reframing the discussion to explicitly address these core values creates new political space for much needed discussion, debate, and action.
Let me conclude by returning to Congressman Bob Ingles medical analogy of removing one’s head to treat one’s backache. If we make an effort to carefully engage our doctor in discussion, we might learn that another treatment option is available, one that requires us to improve our diet and exercise routine, actions that have other positive outcomes such as better health, more energy, longer life, and clearer thinking. We might be more inclined to act on that advice because the treatment seems less threatening to things we care about and produces outcomes we that benefit things we value. Regarding climate change policies, Ingles offers a boarder adjusted carbon tax as a policy that would dramatically reduce carbon emissions, strengthen markets, protect national interests, and meet other politically conservative goals. No doubt countless other win-win strategies to address climate change exist, if we can create the political space to find and discuss them.
[1] https://www.thenation.com/article/capitalism-vs-climate/
[2] Oreskes, N. and E. M. Conway (2011). Merchants of doubt: How a handful of scientists obscured the truth on issues from tobacco smoke to global warming, Bloomsbury Publishing USA.
[3] Grumpy Economist: https://johnhcochrane.blogspot.com/2017/08/on-climate-change-2.html#more. See also The Copenhagen Consensus http://www.copenhagenconsensus.com/copenhagen-consensus-iii/outcome
[4] The analysis uses GDP rather than income, which are different in subtle but important ways, but I use “income” to make the argument more intuitive: Dellink, R., et al. (2015). “Long-term economic growth projections in the Shared Socioeconomic Pathways.” Global environmental change.
[5] Dellink, R., et al. (2015). “Long-term economic growth projections in the Shared Socioeconomic Pathways.” Global environmental change.
[6] Nordhaus, W. D., & Moffat, A. (2017). A Survey of Global Impacts of Climate Change: Replication, Survey Methods, and a Statistical Analysis (No. w23646). National Bureau of Economic Research.