An economic analysis of climate change
Economists have differing views of how to best deal with the problem of climate change, despite widespread scientific consensus on the reality of the trend. Though disagreements persist on whether to stop climate change, adapt to the climate or not focus on the climate at all, adaptation might become the only option if no other action is taken.
The effects of climate change are essentially irreversible, even if greenhouse gas emissions are brought under control, according to a study by Susan Soloman, who is considered to be among the world’s top climate scientists.
“People have imagined that if we stopped emitting carbon dioxide that the climate would go back to normal in 100 years or 200 years,” Soloman said in an NPR interview. “What we’re showing here is that’s not right. It’s essentially an irreversible change that will last for more than a thousand years.”
Cutting more carbon emissions would undoubtedly improve the conditions for future generations. However, when weighing climate change against other issues facing our society, there may be other more pressing problems such as air pollution, lack of clean water and poverty all of which kill millions of people yearly.
One person advocating this view is Bjorn Lomborg.
“Speaking of climate change in catastrophic terms easily makes us ignore bigger problems, including malnutrition, tuberculosis, malaria and corruption,” Lomborg wrote in an article published in the Washington Post.
Lomborg believes that the efforts of the world are better spent on things like disease and poverty, which can be remediated more easily than climate change. He is president and founder of the Copenhagen Consensus Center and is an adjunct professor at Copenhagen Business School.
There are two sides to consider when looking at climate change policies. The first, which Lomborg is doing—looking at the costs and benefits and weighing them against each other. The second—looking at the uncertainty of how climate change will affect the future and taking precautionary measures to reduce risk.
Joe Little falls into the latter group.
Climate change is a very complex problem that will span multiple generations, but economics research shows that it’s possible for the economic benefits can outweigh the costs, according to Little.
Little is an economics professor who has done research in the field of environmental economics. He believes it makes sense to create policies to decrease carbon emissions in order to minimize risk in the future.
However, when it comes to instituting policies it’s easy to forget about Hazlitt’s rule—it’s important to look at both the short and long term effects as well as all the people affected by the policy.
Little discussed some policies that would make economic sense.
“I’m not a huge fan of regulation, in instances when we can find cost-effective solutions to achieve the same goal,” Little said. “Placing a tax on carbon emissions would actually place a price on using the atmosphere as a waste sink.”
With a pricing mechanism like that in place, companies would be able to decide how best to deal with their emissions, which would incentivize them to invest in innovation and technology that would decrease carbon emissions, according to Little.
If there was a tax on carbon emissions it, the revenues could be used to lower other taxes like income tax.
“I think that would help people understand the relationship between their actions with respect to how they emit carbon and how it benefits them in the form of lower income taxes,” Little said.
When it comes to weighing a decision, economists look at the “opportunity cost.” For example, when a student decides to get up early to study for a test, their opportunity cost is the benefit that they don’t get from their next best option—sleeping in.
People only have limited time and resources so every decision has an opportunity cost. When it comes to decreasing carbon emissions, people can consider if their time and resources would be better spent on helping people who don’t have access to clean water or people suffering from malaria.
Either way, there will be costs associated.
“When I was in school the ozone layer was the hot topic but we kinda fixed that problem, this one’s not going to be so easy to fix,” Little said.