The collective wisdom of capital markets is probably still ‘in some doubt’ in many peoples’ minds at the moment. Interestingly though, from a green perspective, capital markets appear to have been estimating the likely costs of climate change to be higher than those predicted by cost-benefit analyses (such as the Stern Report) that have been much maligned by some industry lobby groups. And, of course, this implies that – even from a purely economic point of view – there is a case for stronger climate change mitigation policies than have been suggested by the cost-benefit analyses.
Tag Archives: economics of climate change
Jonathan Harris, “Ecological macroeconomics: consumption, investment, and climate change”, real-world economics review, issue no. 50, 1 September 2009, pp. 34-48,
Harris (Tufts University) begins his discussion by using the charmingly mild phrase “cognitive disconnect” to decribe the yawning great chasm between “scientists’ warnings of potential catastrophe if carbon emissions continue unchecked on the one hand and the political and economic realities of steadily increasing emissions on the other” (p.34)
It is, as he says, “the outstanding economic problem of the twenty-first century. Can economic growth continue while carbon emissions are drastically reduced?” (p.34) And asking that question makes us look more closely at what, in fact, economic growth is and how we might make a successful economic and social transition to sustainability.
Climate change – uncertainty abounds, but this is a risk management decision – not a quest for truth
The economics of climate change is lagging behind the science. We need to improve on this quickly if we are to take the right investment decisions, argues Nick Mabey.
One of the critical policy questions we face is ‘how far and fast should we cut global greenhouse emissions to effectively ensure climate security? Mabey acknowledges that ‘Uncertainty abounds over any choice.’ (p.5) But, he says ‘this is a risk management decision – not a quest for truth.’ (p.5) Continue reading
The Global Development & Environment Institute at Tufts University has released a report on the consequences of unchecked greenhouse gas emissons for Florida. You can find it here.
They estimate that the costs of unchecked climate change – on just three sectors: tourism, electric utilities, and real estate – together with effects of hurricanes would shrink Florida’s Gross State Product by 5% by the end of this century. Obviously, as the authors point out, if costs for other sectors (e.g. agriculture, fisheries, insurances, transportation, and water systems) were included, the costs would be much higher. And, of course, there would be huge non-monetary costs of environmental destruction and human lives lost. It is grim reading.
Consider this, too: Florida won’t be the only place facing major economic, social, and no doubt political disruption. This will be happening all over the world, in differing degrees and forms. It seems a reasonable bet that there will be large multiplier (or ‘knock-on’) economic costs.
Then there are the ‘tipping point’ risks: scientists are now telling us that Earth’s climate could change quite rapidly (and there is evidence of it having done so in the past). We don’t know what that tipping point is, exactly, and in pumping out greenhouse gases, we are conducting a gigantic, dangerous, global climate experiment.
If we add these three things: first round costs, knock-on costs, and risks, plus a reasonable consideration of the non-monetary costs, it is obvious that we ought to be putting large-scale resources and efforts into efforts to reduce emissions.