Economist’s change of mind a worry for climate change

Some people who study climate change believe that addressing it later — when economic growth has made humanity wealthier — would be better than taking drastic measures immediately.

Now, though, one of this group’s most influential members appears to have changed his mind.

In the early 1990s, Yale’s Professor William Nordhaus was among the first to examine the economics of reducing carbon emissions.

Since then, he and colleagues have mixed climate physics with economic modelling to explore how various policies might play out both for global temperatures and growth.

The approach attempts to weigh, in present-value terms, the costs of preventive measures against the future benefit of avoiding disaster.

Prof Nordhaus has mostly argued for a small carbon tax, aimed at achieving a modest reduction in emissions, followed by sharper reductions in the medium and long term.

Too much mitigation now, he has suggested, would damage economic growth, making us less capable of doing more in the future.

This view has helped fossil fuel companies and climate change sceptics oppose any serious policy response.

In his latest analysis, though, Prof Nordhaus comes to a very different conclusion.

Using a more accurate treatment of how carbon dioxide may affect temperatures, and how remaining uncertainties affect the likely economic outcomes, he finds that our current response to global warming is probably inadequate to prevent temperatures from rising more than 2°C above their pre-industrial levels, a stated goal of the Paris accords.

Worse, the analysis suggests that the required carbon-dioxide reductions are beyond what is politically possible.

For all the talk of curbing climate change, most nations remain on a business-as-usual trajectory. Meanwhile, further economic growth will drive even greater carbon emissions over coming decades, particularly in developing nations.

Prof Nordhaus deserves credit for changing his mind as the results of his analyses have changed, and for focusing on the implications of current policies rather than making rosy assumptions about the ability of new technologies to achieve emission reductions in the future.

Many other analyses — including those of the Intergovernmental Panel on Climate Change — do not demand such realism.

Nonetheless, the shift in his assessment is stark.

For two decades, the advice has been to do a little but mostly hold off. Now, suddenly, the message is that it is too late, that we should have been doing a lot more and there is almost no way to avoid disaster.

Perhaps the main lesson is that we should not put too much trust in cost-benefit calculations, the standard economic recipe for making policy decisions.

In the case of climate change, they are inherently biased towards inaction: It is easy to see the costs of immediate emissions reductions, and much harder to quantify the benefits of avoiding a disaster likely to materialise much farther in the future.

By the time the nature and impact of that disaster become clear, it may be too late to act. BLOOMBERG

ABOUT THE AUTHOR:

Mark Buchanan, a physicist and science writer, is the author of the book “Forecast: What Physics, Meteorology and the Natural Sciences Can Teach Us About Economics.”