An Economic Perspective on the Challenge of Global Warming

1. Introduction

The great majority of the population in most countries is now aware of global warming and/or some of its effects; the deniers become scarcer as the evidence mounts, discussion proliferates and the older generation drops out of sight. Increasing efforts have been made to address the problem. A very few countries have responded well, at least by the standards applied say a decade ago, and are on route to ending net greenhouse gas emissions within a few decades.

But the experts are now warning that the steps taken so far are not nearly adequate and that a serious crisis is closer than previously thought, perhaps arriving within 20 years (depending on how “crisis” is defined). Public confusion is prevalent because much of the information is hard to interpret, especially that of a more technical (scientific) or economic nature, and because it is mixed together with much misinformation, a good deal of which is deliberate. Accordingly, public beliefs vary widely both on the seriousness of the issue, on humanity’s responsibility for it, and on what can be done at what cost.

Among informed analysts there is little debate about the lead-in to today’s crisis. The upward trend in average global temperature dates from the 1920s, and is closely matched by that of the height of the sea level; both track quite closely the upward trajectory of global carbon emissions, or of all greenhouse gas (GHG) emissions. Until about 25 years ago there was some professional debate as to whether the human race was substantially responsible for the rising temperatures; now there is none, although there remains discussion as to whether other factors have played a secondary role. In summary, the physical processes of global warming are relatively well understood, and have produced the now obvious conclusion that GHG emissions must be reduced sharply and rapidly if the planet is not to suffer the crisis that experts fear.

This essay focusses on the economics of climate change—the economic costs that are resulting and will result from it, and the economic price that will have to be paid to rein it in. These are, for various reasons, among the less understood aspects of the threat. Thus a major task for economists is to measure the cost to society of GHG emissions, a key input to deciding how much if any of the offending activity should be allowed and how controls on it should be applied. A perhaps even more important task is to explain to the public why the net economic cost of confronting global warming is likely even in the short run to be very small, and possibly trivial, in aggregate GDP terms. Viewed in longer run perspective, the net benefits are enormous, when one compares the predicted losses of say 20-30% of world GDP from continued warming with the required current preventive spending of at most a few percent of that GDP. The way the issue is often discussed, with heavy focus on the losing industries and on the idea of tax increases, does not suggest such a relatively painless, high-payoff solution. Thus, the surrounding economics needs to be laid out in some detail and in a way accessible to as wide an audience as possible. Economists’ third function is to act as the intermediary/referee between those businesses whose vested interests lead them to oppose desirable or even essential environmental policies, governments—whichever way they lean, and the groups pushing pro-green stances. The normally much exaggerated costs outlined by the vested interests, and expressed in a language suggesting they know what they are talking about, need to be contradicted by people who can make the relevant calculations and explain them convincingly. Many environmentalists are not familiar with the economic details and in any case are often seen and portrayed as starry-eyed extremists by business people, so another group is needed to support the economic case for strong policy.

2. The costs/risks of “business as usual”

For some time discussion has focussed on the need to limit global warming to something less than 1.5°C above pre-Industrial Revolution levels, or at worst under 2°C. There are, naturally, a rather wide range of predictions as to the resulting damage, economic and other, if these targets are not met, but even the milder among them give much cause for concern. As both the empirical evidence and the capacity to analyse it has increased over the last 20 years or so, the forecasts have become more dire.

Qualitatively speaking, the predicted effects of global warming include:

i) temperatures that lower some crop yields, make it harder for those who have to work outdoors in hotter climates, and have a range of other effects on the economy, most of them negative;

ii) rising sea levels, which for low-lying countries (like much of Bangladesh) or cities (Miami, dozens of others) implies that people will have to move, at considerable economic cost as well as probable conflict;

iii) more erratic temperatures, with more frequent heat waves and droughts, hurricanes and tornados, and a greater number of floods;

iv) in already hot places, increasingly serious health risks and reduced comfort.

Quantifying some of the economic and other impacts of these effects is naturally difficult since they involve phenomena that the world has not experienced during recorded history, such as the high sea level. On other aspects it is likely to be reasonably straightforward, as in predicting the extra costs of air-conditioning as temperatures rise. A recent effort by Moore and Diaz (2015) to model the economic future under global warming exemplifies the range of possible outcomes. Building on earlier models,1 they conclude that the economic growth of poorer countries will be much more impaired by projected future warming than had previously been thought.2 Instead of a negative impact on per capita income in those countries of something like 10% by 2100, as suggested by some earlier studies, they find a dramatic cut of about 40%. They conclude that, economically-speaking, the optimal pathway ahead would likely be very similar to the most aggressive scenario laid out by the International Panel on Climate Change–IPCC (referred to as RCP2.6).3 That path would limit the temperature increase to between 1.6 and 2.8°C by 2100, with a best estimate of around 1.7°C. In this scenario, human carbon emissions would peak almost immediately and then decline until reaching a level of zero around the year 2070, a very challenging goal given the currently sluggish rate of progress in slowing the rate of emissions growth, let alone bringing it down to zero. Some more recent estimates put things more starkly than theirs; in any case, accounting more fully for the varied impacts of climate damage clearly strengthens the economic case for immediate aggressive efforts to cut carbon emissions.

The conclusions of Moore and Diaz are broadly consistent with the existing literature. Thus, in their review of earlier studies Dell et al (2014, 790) note that analyses of labor productivity, industrial output and economic growth tended to converge around a 1-2 percentage point loss for each 1°C temperature increase in poorer countries. The cited models predict the impacts of warming on traditionally-measured GDP and its growth. When that indicator is replaced by a measure that also reflects some of the damaging impacts of warming on the economy (droughts, floods, etc.), then its effects are by definition larger. Thus, the Moore and Diaz prediction of a 40% income loss in poorer countries by 2100 might well imply a figure of 50% or more by a conceptually more accurate measure, for example one that subtracts the costs of negative weather events and puts a positive value on a more comfortable climate and does not treat the expenses of keeping buildings cool as part of GDP.4

An analytical challenge noted by Moore and Diaz is sorting out the respective roles of two factors behind the greater estimated impact of climate change on economic growth in poorer countries. Since such countries are, on average, hotter than rich ones, they are already exposed more frequently to a variety of damaging impacts of high temperatures and therefore show a higher economic sensitivity to temperature than do richer countries. If this is the main mechanism at work, the damaging effects on rich countries can be expected to increase as they get warmer. Alternatively, higher temperatures may be more damaging in poor countries because their economies are more reliant on climate-exposed sectors such as agriculture and natural resource extraction, or because risk management options like insurance or air conditioning are not as widely available. In this case the sensitivity of poor regions to warming would decrease as per-capita GDP increases. The role of rising water levels may be key to sorting out which mechanism is the more important. Studies predicting that global warming will have its largest negative impacts on economic growth and development in the poorer countries often note that low-latitude, less developed areas face the greatest risk, and some conclude that the bulk of the economic damage will be due to rising sea levels, which forces much displacement of people to other areas and requires investment in capital goods to replace those lost to the water. Reining in the rising water level would also help to save at least some of the world’s coral reefs, which support global fisheries,5 and might greatly reduce the number of animal and plant species losing their habitats with the resulting risk of extinction.

A key indicator in the economics of climate change is the social cost of the emission of a ton of CO2 -sometimes referred to as the Social Cost of Carbon (SCC), a single number that gives the value of preventing that ton of CO2 from getting into the atmosphere now. Its level depends on two things—the time trajectory of the damage resulting from the addition of that ton of CO2 to the atmosphere now, and the “discount rate” used to convert future losses of income (either for this generation in later years or for future generations) to the present time, in order to come up with a single number that gives the value of preventing that ton of CO2 from getting into the atmosphere now. Estimates have been rising as the evidence of damage from global warming mounts. Anything under $40 is now considered implausibly low. Moore and Diaz’s original calculation put the SCC in a range from about $70 to $400 per ton, with a best estimate of over $200, this under the assumption that there will be a fairly rapid and effective policy response to climate change. In the absence of such adaptation, the SCC could be substantially higher, since the damage from a given emission would be greater.6 The safest assumption is that best guesses of the cost of emissions will continue to rise for some time. As well as being too low, many earlier studies did not focus on the large uncertainty surrounding the SCC, an uncertainty which suggests that climate policies need to be seen in part as . Rather than trying to identify a single exact value for the SCC, mitigation policy should be designed with the goal of managing uncertain climate risks. Since, however, even the lower figures within the range of possible values of SCC and of probable future economic damage are very high in absolute terms, the basic message is clear; we must quickly ramp up remedial policies.

Several conclusions emerge clearly from the studies available:

i) Global warming is occurring rapidly, is mainly, perhaps almost exclusively due to human activities, and is bringing serious and possibly enormous economic and other costs, which are greater for poorer people and poorer countries.

ii) Co-ordinated policies can do much to reduce the rate of warming and hence the damage it brings, and can do so at relatively low economic cost.

iii)The main obstacle to good policy is political rather than either technical or economic.

iv) Behind the political failure lie a lack of public knowledge, political opportunism and inadequate leadership, together with the differential impact of warming across groups and countries, which makes it harder for all to collaborate. Of particular importance are the unusual American belief pattern and the possibility that the negative impact of warming on the US economy will continue to be modest over the short run.

3. The aggregate economics of global warming.

Two economic questions are central to thinking about global warming. One involves the impacts of that warming on the world’s (or a country’s) future economic trajectory. Studies like that of Moore and Diaz address this question. The other involves the economic costs and benefits of limiting global warming, i.e. of “going green.” This latter question can be broken into static and dynamic components; the first involves the economic cost at a point of time (now, say) of confronting the challenge (i.e. how much does doing so diminish the available goods and services for other uses at this time?); the second involves whether and how doing so will affect economic growth in the future. In Figure 1, curve GDPwgw shows the trajectory of world GDP without global warming and GDPgw gives the trajectory with global warming but no policy response to it. The distance between the two curves at any future point of time thus measures the impact of the global warming when nothing is done to limit it. As portrayed here, GDPwgw continues to rise indefinitely, whereas GDPwg eventually begins to decline as the gap between the two curves widens. Curve GDPgwc assumes global warming is happening but also reflects the cost of policies to control it—the gap between this curve and GDPgw at any point of time measures those costs. Since they are small (at most a few percent of GDP) the former curve lies below but close to the latter. It can be thought of as reflecting the value of goods and services that would be available for uses other than fighting global warming if the climate policy brought no economic benefits. Finally, curve GDPgwcb allows both for the costs of climate policy and the benefits they render; its trajectory lies above that of GDPgw as long as the cost of the climate policies is exceeded by their benefits.7 The gap between these two curves measures the gross benefits they provide; since their benefit/cost ratio tends to be quite high, curve GDPgwcb lies much farther above GDPgw than GDPgwc lies below it. How far GDPgwcb lies below GDPwgw measures the net loss experienced due to global warming after both benefits and costs of the policy response to it are taken into account.

The economic analysis of global warming boils down to tracing out each of the four cited curves for the world or whatever political unit one is interested in. Their positions in Figure 1 correspond to a reasonable guess for the rest of this century. Without global warming, economic growth would be likely to slow down gradually due to a combination of a slower increase in population and the fact that economic growth becomes harder to achieve in the now developing countries as they narrow the gap with rich countries and are thus less able to grow simply by borrowing technologies from those more advanced countries. The gap between GDPwgw and GDPgw is shown to rise markedly, since there is little doubt that in the absence of policy response the economic damage from global warming will be large and growing; in this example the latter curve is 40% below the former by 2100. The position of curve GDPgwc is easily established since, as noted, the economic cost of climate policy will be at most a few percent of GDP; the former curve is thus just a little below GDPgw. Probably the biggest uncertainty revolves around the most important curve, GDPgwcb, which indicates how the world is doing economically after the damage of warming and the cost of spending to confront it are both taken into account. In the best of cases it will not be far below the “no-warming” curve GDPwgw; in the worst it will be a long way below that curve.

Apart from identifying the economic trajectories of interest, it is important to distinguish among those categories of spending that are somehow related to climate policy according to their “economic cost”. A key point is that spending does not always represent a cost to the economy. For example, as per a standard distinction in public sector economics, not all fiscal expenditures imply a “real cost” to the economy. Building a road is a “real” expenditure, because it uses up resources which thus become unavailable for other uses. In contrast, taxes and subsidies are simply a transfer from one economic agent to another; aside from the costs of administering them, they do not diminish the resources available to produce goods and services. Thus, a subsidy to lessen greenhouse emissions is not comparable to the expenditure to build a road. The former has no “opportunity cost” (again, apart for the resources used in administering it) whereas the latter does.

A rough breakdown of spending somehow related to climate change (CC) distinguishes:

a) Spending that would not occur, absent the goal of fighting that change, including things like research on carbon capture;

b) At the other extreme, spending which is related to CC but not caused by it, as with investment in green technologies when those technologies are already cheaper or as cheap as any alternative. Had such investment not been made in the green technology, it would have gone to a less-green alternative at equal or greater cost per unit of energy produced. Thus, when a green technology replaces an equal-cost polluting one just as the latter wears out, choosing the “green” option has no net cost. When the new green technology replaces a polluting one on which the investment has just been made then there is a loss (cost) involved, since the replacement would not have been necessary absent the CC challenge.

c) Spending which provides benefits on the CC front (often lower CO2 emissions), along with some other good or service (e.g. electricity) but at a higher cost than an alternative technology could have achieved. Thus, if a green technology can produce as much energy as a non-green one if 20% more investment is undertaken (say $120M instead of $100M), then the CC-related spending involved is in fact the difference between the two options ($20M). Within this category of joint benefits (climate-related plus something else), the amount of spending necessitated by and hence attributable to CC abatement can range anywhere from 1% to 99% of the total for a given expenditure.

The quite different economic meanings of these three categories, and the need to know which spending falls in the second category (and thus entails no net cost) and the details of each expenditure that falls in the third one, imply that calculating the spending attributable to the battle against CC is complicated. (The same goes for the amount that should be undertaken to that end to achieve any given GHG reduction goal.8) The many estimates that simply treat all investment in green technologies as if their only benefits were in the slowing of global warming are probably overstated by a substantial multiple, some as high as 5:1 or 10:1.9 But coming up with a single, reasonably precise figure requires detailed analysis.

One study which attempts to approximate the true cost of abatement,10 that of McKinsey and Company (2013), estimates that if the world utilized all of its abatement opportunities to their full potential, the total global cost would reach €200-350 billion per year by 2030–less than one percent of the forecast global GDP in 2030. The UN’s fourth National Climate Assessment estimates that the commitments made thus far by the 197 signatories to the Paris Accord amount to only a third of the effort needed to keep warming below the frequently-used benchmark of a 2 degree increase from pre-industrial times. By any relevant economic measure that effort has been small; even tripling it would leave it small. Investment in green technologies is probably in the range 0.5-0.7% of GDP,11 with only a smallish share of this being explicitly made necessary by global warming (see the above three-way distinction of spending categories). Investment in green research is probably well under 0.5% of world GDP. The net cost to the world economy from the current climate change response is thus unlikely to be much above one half a percent of GDP, thereby probably deserving to be described as trivial.

A few opponents have described the potential cost CC policy as “crisis level”. When all spending that has anything to do with climate policy is included (even if it is not a cost, as defined in economics), and allowing for the need to spend disproportionately up front, the figure might reach a peak of 3-4% of world income at some point. In fact, even this is anything but a “crisis” spending level, far from the 40% plus of GDP that the main contenders in WW11 were spending at the peak. Then, after allowing a more precise estimate as per the approach outline above, the true economic cost of the needed spending probably falls around 1-2% of world income or output; in contrast, most WWII spending imposed an almost dollar for dollar net reduction on the availability of other goods and services.

Although not many countries have thus far transitioned most of the way to a green (no net emissions) economy, the experience of those that have supports the view that the required spending is not exorbitant. The main message from experiences like those of Sweden and other leaders is that the transition to a low-carbon economy is feasible. It requires policy competence and political will, neither of which can be at all taken for granted. Though the process has costs for some, they are small relative to the benefits to the society, as reflected, among other ways, by the fact that Sweden’s economic growth appears not to have been hampered.

Creating much of the confusion and conflict around the economics of global warming is the fact that it does not by any means affect all people, countries or industries the same way. Thus the global story as portrayed in Figure 1 is not replicated in each country. For a country with a large endowment of coal, like Australia, the shift to green technologies will be less beneficial or more costly than in a country which never had many fossil fuels and now develops a comparative advantage in clean technologies. Even more striking is the fact that, within a generally typical country in terms of natural resource endowments (say the US), there will be losses to the fossil fuel industries and gains to the green ones. At the world level and in many countries, the overall picture is very similar to the story portrayed in Figure 1. But that fact by no means stops those groups who will lose through climate policy from raising their voices in complaint and from implying that major losses are also being suffered by their countries as a whole.

4. The possible policy responses

Broadly speaking, the potential responses to global warming fall into three categories: “mitigation by reducing emissions, “adaptation to the effects of warming by developing systems resilient to its effects, and “climate engineering Mitigation involves actions to reduce greenhouse gas emissions or to enhance the capacity of “carbon sinks” to absorb those gases from the atmosphere. Among the many ways to reduce emissions are energy conservation through the use of low-carbon technologies (e.g. renewable energy like solar and wind, nuclear energy), carbon capture and storage, and the enhancement of carbon sinks through reforestation, preventing deforestation, and other techniques. Adaptation to global warming may be planned, in reaction to or in anticipation of the warming (as where governments develop new heat-resistant varieties of crops), or spontaneous (e.g. purchase of air-conditioners); both are already occurring, the former on a limited scale. It is especially important in developing countries since they are expected to bear the brunt of the effects of global warming, but the capacity for humans to adapt is generally less in those countries, partly because of their more limited resources. Finally, climate engineering is the deliberate modification of the climate. Most of the techniques being explored in this area involve either solar radiation management or carbon dioxide removal from the atmosphere on a large scale. Although many efforts are under way and some are in theory quite promising, their short and medium-term potential remains unclear and the extent of unpredictable side effects is, by definition, hard to gauge unless and until they are actually tried.

Any judgment as to how much each of these three broad responses should be pushed must be based on an assessment of the likely damage if action is not taken, and on what can realistically be expected of the other two. Those possible responses where the cost is relatively low should be and sometimes are being undertaken in spite of the uncertainty as to how far and how fast climate change will advance. Approaches that are either very costly to implement or have fewer quick benefits should be seen as an insurance policy buying security against a possible disaster, as when one buys insurance against one’s house being burned.

The clearest way to mitigate emissions is by finding and exploiting less-polluting sources of energy; wind and solar power are obvious elements of this picture. Hydroelectric power, currently the major source of clean energy, has promise for expansion in some regions but, in contrast to the wind and solar options, much of its obvious potential has already been taken up. The dams used to store the water that produces the energy often themselves do serious environmental damage, as well as leading to conflicts between countries or groups of people. Meanwhile, the high environmental costs of the traditional forms of electricity generation have changed the balance of expert thinking on the other form of clean energy–nuclear power. It has its own dangers, but these are now recognized to be much less than those of fossil fuels. But the risks it creates are highly visible—the very term “nuclear” evokes fear in many people, while the much greater potential damage from global warming comes gradually and with stealth. Dramatic episodes like the 2011 Fukushima nuclear disaster in Japan spooked a number of governments, including that of Germany, which opted to close its nuclear plants, thereby making it more difficult to meet its future GHG emissions goals. The story of nuclear power has in this sense contrasted dramatically with that of fossil fuels, where regulation has been weak and little attention has been paid to safety, since the dangers (thus far primarily lung disease) are much less evident, less dramatic, and less attributable to specific sources, even though they are quantitatively greater.12 In the case of the nuclear industry such vested interests as there are have not been able to sidestep the negative fallout from a few big accidents. The vested interests that fought the successful curbing of acid rain (through the Montreal protocol) were stronger but ultimately similarly unsuccessful. In the case of fossil fuels, however, they are extremely powerful and have been very adept at spreading misinformation. This is especially challenging in a context of anti-science governments (at least anti-science on this issue) as with George W. Bush and Trump in the US, Harper in Canada, and a number of others around the world. Difficulties notwithstanding, overall acceptance of nuclear power has risen somewhat as a result of global warming. Ongoing technical challenges are to make it both cheaper and safer.13 Its share as a supplier of world energy is unlikely to rise very fast, if at all.

Carbon capture–or “negative emission technologies” (NETs), has been discussed by scientists and economists since the 1990s, and is now seen as an essential part of a successful long-run global warming strategy.14 The necessary reduction of its cost is, fortunately, well under way. One technology involves collecting CO2 at power stations and factories and burying it underground. In a version known as “bioenergy with carbon capture and storage” (BECCs), the power station is fuelled by crops that can be burned to create energy while their CO2 emissions are then injected into deep geological strata. This approach has advanced only slowly because of high costs and questions as to whether the gas will stay put. In a recent experiment taking another tack, Jeorg Matter and colleagues (2016) converted the CO2 into carbonate minerals like calcite and magnesite, which are stable and could stay locked away indefinitely. This technology requires basalt, which has elements that react with CO2. The basic process occurs in nature but their approach speeds it up. It remains to be seen whether production can be scaled up to the needed level. Basalt is mainly found on the ocean floor. Iceland has great quantities of it, raising the issue of whether pipelines could take exhaust gases there. In another recent potential breakthrough, a British Columbia start-up funded by Bill Gates claims to be able to lower the cost of capture to under $100 per ton from the current range of $600 for existing “direct air capture” technologies. Keith et al (2018) argue that this technology could generate a low carbon transportation fuel that would replace traditional gasoline. In 2018 one of the awards of the X-Prize Foundation, which encourages particular innovations that traditional financial backers are unlikely to support, is assigned to the capture and storage of carbon. Creating more demand for CO2-based products would provide an additional incentive to take it from the atmosphere. Along with making the production of energy less polluting, lowering the total use of energy is another way to curb emissions, by making heating more energy-efficient and curbing cement production (still a source of much emission) and by inducing builders and residents to be greener.

On the technological side, many promising advances are thus in the pipeline for both emissions reduction and energy conservation on the one hand15 and for absorption on the other. And, with many estimates of the SCC now falling within the $200-400 range, it is evident that direct capture of CO2 from the air may soon be an economically efficient approach, if it is not already.16 Though for most experimental technologies in each of these categories it is not yet possible to predict whether by themselves they will eventually make big contributions in the ongoing battle, the law of averages suggests that a reasonable number will and that their aggregate impact will therefore be substantial. The political difficulties in curtailing the use of fossil fuels by raising their price means that the option of lowering the cost of alternatives will often be a quicker route.

Adaptation, the second broad response to global warming, involves a myriad of mechanisms, thus far mainly the adjustments people themselves undertake, such as greater use of air conditioners, avoiding working outdoors at mid-day, improving the insulation of houses, etc. Governments, businesses and NGOs can all make many useful contributions. The most important will be those that involve the world’s poor. A recent example involves microfinance. In Jan., 2018 Visionphone, a microlending charity, and Global Parametrics, a venture that studies climate and seismic data, jointly launched what they called the “world’s largest non-governmental climate-insurance program”. It plans to offer loans across six countries in Asia and Africa to about 4M people affected by climate-change related calamities.17 The need for such an initiative reflects the fact that it is often in the wake of calamities that credit is hardest to obtain. Earlier evidence suggests that the great majority of such loans are repaid on time, although sometimes formulas set by regulators get in the way.

Adaptation will inevitably involve dealing with political conflict and national security if, as experts predict, climate change is accompanied by drought, food insecurity, increased likelihood of communal and ethnic violence, rebellion against the state, internal or civil war, and interstate conflict. The role of drought is becoming clearer every year. In the town of Baga Sola in Chad, near the border with Nigeria, 2.4M people have fled the fighting around the borders of those two countries, Niger and Cameroon. Much of the violence is directly attributable to Boko Haram, whose members aspire to establish a caliphate to impose sharia law, put an end to Western style education, etc. Other causes include poverty, which makes fighting (and the pillaging that goes with it) a good career move for young men, and the often predatory, incompetent governments of the countries involved. But climate change is a major background factor. It has shrunk the area of Lake Chad by half since the 1960s, increasing the competition among farmers and fishermen for water.18 Drought brought on by climate change plays a role in Syria’s conflict. Its contribution in these and other places leads many to suggest that warming temperatures pose a national security risk in various corners of the world. Conflict then erodes societal capacity to adapt to the climate change, as it depletes human resources, destroys infrastructure, exhausts natural resources, undermines social networks and weakens government institutions. In turn, better adaptation might diminish the likelihood of conflict and increase national security. Innovations to improve property rights may be needed to limit the damage done by the forced movement of people in low-lying and very hot zones, and in light of the fact that battles over land are a common source of friction, injustice and violence at the best of times.

The longer climate targets are missed the more likely it is that some form of geoengineering will become essential.19 None has been tried so all would carry their risks of failure and of unpredicted side-effects, but might still be made necessary by looming catastrophe. A number of analysts argue that various options should be on the table as an emergency response if conditions worsen enough. They would have the advantage of affecting the climate immediately, like a huge volcanic eruption which spews sulphur dioxide into the upper atmosphere. They might also be less expensive than the needed greening of the world’s energy infrastructure. They do not provide a permanent solution, but rather must be carried out periodically until atmospheric CO2 levels are brought down to an acceptable level. One approach is to inject aerosols into the atmosphere to reduce the amount of solar radiation heating the planet, in a manner similar to that of air pollution. This option is quite controversial because of possible unintended consequences, such as altering rainfall patterns that could lead to drying of the tropics. So research and planning are crucial, including investment in testing and technical preparedness; today the effort along these lines are very limited, increasing the chances that the wrong kinds of climate-engineering schemes will be deployed by parties insufficiently informed by research (Xu et al, 2018). Some other effects of emission-linked problems like ocean acidification would in any case not be rectified by this step.

Various specific techniques for solar geoengineering have been suggested. After reviewing the capabilities and costs of various lofting methods intended to release sulfates into the lower stratosphere, Smith and Wagner (2018) suggest an option that involves developing a new, purpose-built high-altitude tanker-plane with the capacity to deploy at altitudes as high as about 20 km. They conclude that it would neither be technologically difficult nor prohibitively expensive—at an average cost of about $2.25B per year over the first 15 years of deployment.20

With current estimates indicating that curbing emissions is cheaper than taking carbon directly from the atmosphere or blocking sunlight, public discussion focusses mainly on that first option. But since it has not been performing well (due to political constraints) and the hope that by itself it can get us far enough is rapidly diminishing, it must be presumed that in the medium run (say the next 20 years) adaptation will have to be brought into play on a large scale. Depending on its success, the final option of climate engineering may or may not become central to the overall effort.

Quantifying progress thus far

The middle years of the 2010s appeared for a moment to mark the beginning of the long-hoped for slowdown in greenhouse gas emissions. Despite modest growth in the world economy, CO2 emissions from fossil fuel combustion, cement production and other industrial processes remained relatively stable from 2014 to 2016. Total greenhouse gas emissions had peaked in 2015 and fallen a little in 2016. This brought optimism to some climate policy discussions, but it ended with the 2017 numbers. CO2 emissions from energy and industry had increased, following the three-year period of stability, while total greenhouse gas emissions, including those from land-use change, rose by over 1% in 2017 (United Nations IPPC, 2018, 6),21 this is in a context where it was predicted that by 2030 global GHG emissions needed to be approximately 25 % (55%) lower than in 2017 in order to put the world on a least-cost pathway to limiting global warming to 2°C (1.5°C). More recent estimates suggest the needed reductions are even bigger than these.

Energy generation is at the centre of the greenhouse gas drama, since it accounts for nearly four-fifths of those GHG emissions that result from human activity. As noted, the needed transition from an energy system dominated by fossil fuels to a low-carbon one involves two options: renewable technologies (including bioenergy, hydropower, solar, wind, geothermal, and marine energy) and nuclear energy, both of which produce very low CO2 emissions per unit of energy generated. Progress in “decarbonising” the energy system (including transportation, heat and electricity) has been slow, with fossil fuels still the dominant source.22 Though the share of renewables increased by approximately 5-6 percentage points over 2005-2015, that of nuclear energy decreased by almost exactly the same amount. Progress on electricity decarbonisation has thus been stalled due in part to the growing aversion to nuclear energy. Over the quarter-century 1990-2015, the share of electricity produced by low-carbon sources (renewables and nuclear) dropped by only about three percentage points. Current green energy investments do signal much more change over the coming decades, but their impact on decarbonization is gradual since energy plants last a long time. In 2004, world spending on renewable technologies (excluding large hydropower) amounted to $US47B; by 2015, it had increased to $286B.23 Growth has been fastest in China, from 3B to 103B, making it the largest single investor, in fact greater than the United States and Europe combined. For the world, the share of GDP channelled into renewable energy rose from a little above 0.1% in 2004 to about 0.5% in 2015. In 2016, solar and wind energy each accounted for 47 percent of renewable energy investment (excluding hydro). Their share has been increasing, especially over the last few years. That of bioenergy (both in the form of biomass and liquid biofuels) which had previously taken a sizable share of global investment, peaked at 36 percent around 2006, then dwindled to less than 4% by 2016 (Ritchie and Roser, 2017, 20-22).

Policies to lower the levels of CO2 and other greenhouse gases.

Curtailing GHG emissions needs to draw on some combination of state-imposed economic incentives to do the right thing, together with citizen action/involvement, from choosing to consume goods whose production is less polluting, to contributing personal time to shore up the planet’s defences, to persuading others to make such contributions. Both approaches are likely to be necessary. The second by itself is inadequate, partly because its potential impact may by itself be fairly limited, partly because the misbehavior of some people may offset the positive contributions of others unless the government intervenes. Most of the discussion thus far has focussed on the pricing and regulation side as opposed to the citizen-action side. It is clear that relatively few citizens are at this point willing to make great direct personal sacrifices for the future health of the planet, though this is changing as younger, more educated and more motivated generations replace older ones.

On the economic side, the important policy instruments for the medium run during which this battle must be won fall into several categories. The most obvious is getting price incentives right. This involves imposing some sort of penalty on the use of polluting energy sources and removing existing subsidies to their use, which are still present in tax systems and in other forms; oil, natural gas and coal companies receive hundreds of billions of dollars in such subsidies each year, as do consumers in countries where prices are kept below the world level. The most widely discussed policy instrument is a carbon tax or some reasonably good substitute for it; its objective is to lower emissions by making them more expensive to those who generate them.24 It also raises government revenues (unless matched by a decrease in other taxes, or by a pay-out of some sort), shifts the supply of goods and services towards items that are less polluting in their production, and shifts the demand (consumption) in the same direction by raising the relative prices of the high-emission items.25 As it raises the production costs of emission-intensive goods and services, it has the longer-run effect of encouraging private R&D to find less polluting technologies. Affecting future as well as present behaviour of business and of individuals is central to success; polluting industries must over time be made less attractive to investors, as they factor in how future green regulations will curtail activities and profits. Provision of selective subsidies for investment in already existing clean technologies is another way to get these technologies into production so that standard “learning-by-doing” mechanisms can kick in, along with economies of scale. Public spending on the search for new and better technologies, in universities, think tanks, etc., and support for private spending along these lines is another priority, especially for success in the medium and longer run. Then there are a range of other ways (beyond the emission-control policies) to shift the levels and composition of goods and services further away from the high-emitters (like air and car transport and animal production) and from prestige goods whose production does not contribute to societal wellbeing. Among the instruments are taxes/subsidies and, in extreme cases where taxes do not dissuade users even though the associated damage is large, bans.

Since the economic logic of a carbon tax is clear but much of the popular resistance to it relates to its being labelled a “tax”, and thus understood to lower a person’s disposable income, a sensible approach is to make sure that its imposition does not in fact increase the total tax burden.26 Progressive politicians are increasingly opting for this approach, e.g. by lowering other taxes when they impose this one. But this is not enough to fend off those who whip up the public against any taxes they (the politicians or the interests they are working for) may not like. Transfer of the resources arising from the tax into a fund which is then directly returned to households may be more promising, to the extent that it reduces public uncertainty as to whether the overall tax bill is being raised.

The most popular alternative to a carbon tax is the “cap and trade” mechanism. Its modus operandi involves the government placing a cap on the amount of greenhouse gas emissions to be allowed and then letting companies pay for and trade “permits to emit”, whose total adds up to the amount of the cap. The susceptibility of a carbon tax to especially negative political reaction raises the question—how inferior are the next-best policy alternatives in meeting the goals of curbing those emissions with as little economic cost as possible? The answer depends on the setting. To maximize societal welfare, the level of the carbon tax imposed on a polluting activity should in principle be set equal to the damage done by that pollution. It has the advantage of taxing those responsible in direct proportion to the damage they do and, in taxing all polluters, it takes advantage of the fact that anyone—whether a major or a minor polluter, who can easily cut his/her emissions is provided with the incentive to do so. The only possibly valid economic critiques of such systems involve their distributional impact (is it borne excessively by lower income people?) and the costs and fairness in their application, which varies with a country’s administrative competence and with the complexity of the regulations involved. Under cap and trade, in contrast, the economic burden may not be as closely aligned to the damage done, and the system does not provide an incentive for everyone to emit less. But the better it is designed, the closer it will come to matching the efficiency of the carbon tax. Both cap and trade and carbon tax mechanisms can set initial levels wrong, such that they then have to be altered.

As the vulnerability of a carbon tax to political opportunists becomes more apparent, the issue of how much less efficient the alternatives are has come centre stage. Jaccard (2018), a Canadian expert on global warming policy, urges economists to be more flexible on this point, arguing that alternative ways of dealing with the problem need not be much if any less efficient and can be much less conflictual politically. He was one of the designers of British Colombia’s combination of a low carbon tax and a set of what he calls flex-regs (flexible regulations), which in fact do most of the work of lowering emissions in that province. Among such “flex regs” has been the phasing out of coal plants while allowing competing electricity generators to determine the cheapest mix of low-emission wind, solar, hydro, geothermal, nuclear and other technologies. Phasing out of gasoline vehicles can be required in conjunction with allowing competition among producers of electric, biofuel and hydrogen vehicles. Another step called for British Columbia Hydro to cancel intended coal and natural gas plants and develop low carbon alternatives from competitive bids. This picture is typical of a good number of other North American jurisdictions as well; thus far, carbon taxes in place or proposed are far too small to achieve what must be done, so the political necessity is to rely mainly, sometimes exclusively, on other mechanisms. With time and public familiarity with them, the tax options will presumably be able to carry a bigger share of the load. In the meantime, however, experts like Jaccard emphasize the need for those other mechanisms and the importance of designing them properly.

Who are the big GHG polluters?

Some countries, generally the richer ones, pollute more per person than others; this pattern reflects the fact that within countries better off people contribute more to emissions than poorer ones. China and the US are now the world’s largest polluters, with China by far the bigger. Both are key to climate success at the world-level, partly given their direct contributions to the problem and partly because both have the potential to be policy leaders in this area. In neither case is it easy to predict how policy will evolve over the short to medium run.

Several European nations score better than other countries/regions on global warming policy. Sweden and Denmark record per capita CO2 emissions at about half the rate of the US, Canada and Australia. But most industrial countries have experienced bumpy roads in their early attempts at climate change policy, adding up to the global lag between where we are and where we should be. Limiting the carbon footprint is especially challenging in those countries with a comparative advantage in exporting fossil fuels, like Canada (oil and natural gas), Russia (oil) and Australia (coal), or which are leading producers (US, Poland) or highly dependent on them for energy (Poland gets 80% of it from coal). Their experiences give a glimpse into what a confrontational political issue this can be. In Canada one debate currently revolves around whether the country should build a new pipeline to export natural gas.27 In Australia, the world’s largest exporter of coal, climate and energy policy have infused politics for a decade, helping to bring down both liberal and conservative governments. In 2018, the failure to pass legislation that would have reined in greenhouse gas emissions, together with strong opposition from the Murdoch-controlled media, helped to precipitate Malcolm Turnbull’s ouster as prime minister by Scott Morrison, an ardent champion of the coal industry. Turnbull had signed the Paris Accord, after himself ousting Tony Abbott, an opponent of climate change policy, in 2015.

Though setbacks at the national level are discouraging and damaging, positive steps and pressure are occurring at other levels, as populations become more active in support of climate control. British Columbia in Canada is widely cited for its effective approach. The US also differs from many other countries in the degree of decentralization of political power, both at the national level, where both Congress and the executive are involved and as between the federal and the state governments. By late April, 2019 the governors of 24 states, including some industry-heavy places (like Illinois and Pennsylvania) had joined an alliance to combat global warming, with vows to meet the emissions targets set in the Paris Accord and de facto defying Trump to pull out of it. His administration is, however, fighting back, among other ways by telling scientists not to include worst-case scenarios of climate change in the next National Climate Assessment, due in 2021 or 2022; some were told not to make any predictions for changes after 2040, when the biggest negative impacts will be felt.29

The blame for putting the planet in peril may, of course, be allocated in other ways than country of emission. One of the most obvious is by income and wealth. Here the story is much more dramatic. As Oxfam (2015) lays out, the world’s richest 10% is responsible for the same total CO2 emissions as the remaining 90%; their carbon footprint is 60 times that of the world’s poorest 10%. Global emissions could be cut by a third if the richest 10% cut per capita electricity use to the level of affluent, comfortable Europe (Wallace-Wells, 2017). Meanwhile it is the poorest who are most subject to the negative impacts of climate change. These extreme gaps reflect both the large income differentials involved and the more energy-intensive consumption pattern of the rich, a pattern which is especially apparent for items of conspicuous consumption. If, as argued in Berry (forthcoming), 20-30% of world consumption adds nothing to societal welfare, then one concludes that the planet would not be in peril today but for the extreme concentration of income, together with the socially wasteful consumption particularly characteristic of those at the top. Although China’s income inequality has risen dramatically over recent decades, the lifestyle of its top 10% is still much less carbon-intensive than that of its American counterpart or those of almost all of the other members of the group of 20. Thus, although China’s total emissions of CO2 now exceed those of the US, their wasteful emissions–those associated with socially useless competitive consumption, are dramatically less. Accordingly, the US must now be considered the biggest culprit in this ongoing tragedy. Since the Environmental Protection Agency identified the issue in its 1979 report the country has been a dramatic laggard, setting the stage for the greatest policy failure in the country’s history.

Policy and politics at the national level

Several groups of people are important in determining the progress countries make. The technical experts (scientists and economists) might seem to be the most obvious. They have identified the gravity of the problem and continue to improve their estimates of the ongoing future physical, economic and other damage, and to design appropriate remedies. Politicians play a key role since the implementation of most of the steps needed to control emissions must come from governments. Progress towards decarbonization varies greatly across countries, partly because the objective challenge is much bigger for some, but also because the quality of policy-making varies greatly, reflecting differing levels of competence and differing degrees of business and public pressure against good policy. Lessons can be learned from countries at both ends of the performance spectrum. A few leaders have been effective in educating their publics on the challenge, but some have built their careers in part on climate change denial and have attracted many followers. The determinants of policy in democratic countries include the degree of corruption within the political process and the capacity of the special interests to persuade the public of things that are not true. When the former is high, vested interests’ capacity to in effect bribe politicians to do their bidding is increased. Meanwhile, the tools of manipulation of public opinion have been evolving rapidly.Within governments, the interaction between politicians and technocrats can be important, since the latter are typically better informed, do not have the same temptation to deny or twist facts, and are less likely to take bribes from private interests. Where they play a bigger role, policy tends to be better. The public can be a key actor, though its impact depends on where it gets its information and, on the country’s, political structure. Increasingly, groups of activists who pressure the government are protesting publicly and/or taking their claims to court.

Among those firms less linked to global warming as contributors, many are willing to build it into their planning, but not clear on how best to do so; much of the scientific evidence and predictions involve the overall picture and the broad trends, whereas risk managers at individual firms want to know about more specific threats to specific activities over specific periods of time. Some large firms (e.g. Royal DSM, a Dutch chemical company) undertake their own research on where and how climate change may affect their businesses. Others rely on “climate consultants”, a type of business that has grown rapidly over recent years, carrying out tasks like estimating the future exposure of buildings to the effects of climate change. Many such firms are small though McKinsey, a large consulting firm, is also getting involved. Apart from not knowing exactly what to do, many firms are also deterred from taking early action by the “first-mover disadvantage”. Building in defenses against the impact of warming often implies a cost disadvantage vis a vis competitors until a disaster strikes or regulations are tightened, so most firms simply wait until that time, then make the changes it forces. The financial world, along with much of the business world in general, is building global warming into its thinking and plans. The optics of holding stocks in carbon-intensive industries have been worsening. The owners of some financial assets, like teachers’ pension funds, are willing to earn a somewhat lower rate of return in order to avoid contributing to environmental damage; in this they are unlike pure profit-maximizing firms.30 The above-normal profits reaped by some monopolies give them the option of doing good for the environment without going out of business, but few exercise it. But the most striking aspects of business behaviour as it relates to CC have been the extreme political pressure exerted on governments by the fossil fuels industries and the dramatic dishonesty of their public pronouncements (see below).

How the political world handles the global warming issue is inherently less predictable, at least in the short run, than for business and civic activism. Individuals or small groups can sometimes have major impacts on the political process, whether in democratic or non-democratic settings. In the former, the personalities contending for power in a given election and the rules that determine which party and which individuals are elected interact in complicated ways, leaving a potentially large role for luck; as a result, there are many ups and downs over time in given countries or other political units. Such swings sometimes reflect changes in public beliefs and preferences, but at other times they may even go in the opposite direction from public sentiment. As discussed below, while over the longer-run public awareness of climate change and the threats it poses has increased, short-run shifts as to what should be done are less predictable and reflect the way the issue is presented, the state of the economy and the public mood. When things are going badly on other counts, any global warming policy that appears to have a cost attached is unwelcome, and opportunistic politicians take advantage of this.

In short, while the technical challenges that lie ahead in terms of developing an effective response to global warming are undoubtedly substantial, it now seems likely that if humanity fails it will not be through inability to meet those challenges but rather through the failure to apply the already available policies and tools quickly enough. This confers great importance on the politics of global warming–the underlying popular understanding of the phenomenon, the pressure that comes from vested interests expecting to be hurt by it, the need for leaders who can bring others along on this issue, and the need for organized public support. We need to understand who believes what about climate change and why it matters. And, since governments must lead the way, public confidence in them is of great import.

5. Why is the public relatively unconcerned?

With the case for stronger climate policy as overwhelming as it is, public awareness, understanding of and views on global warming can be key. Essential messages for that public are why we urgently need to take action, and why the counter-arguments are fallacious. Among the major political challenges is the near-universal misunderstanding that curtailing the use of CO2 polluting technologies and products substantially weakens a country’s economic performance, either in terms of the level and growth of GDP or of international comparative advantage. The loss resulting from having to close down an economic activity, or from not being able to export items that one previously could, is much smaller than it would be if the resources currently used in those activities could not be transferred to productive uses elsewhere. In fact, they virtually always can be, albeit sometimes with a time lag. This means that, even if green policy brought no inherent gains, its cost would typically be a fraction of what it is commonly believed to be. In fact, since global warming brings large economic losses, good climate policy would, by preventing those losses, bring major economic benefits (for example, much higher GDP). Some of these arguments do not get through to the public because they involve complicated technological or economic ideas, on which vested interests willing and able to mislead have had considerable success. Unfortunately, the losses from climate policy are often more direct and visible than the gains. Another source of popular resistance to good policy comes from the tendency to think short rather than long-term, especially when the latter is somehow threatening. Historians emphasize episodes like Britain’s famously refusing to countenance the possibility of Germany’s WWII invasion. Policies that require continuous effort over time are a bigger challenge than those that can be settled once and for all, like building a road. People tire quickly of the same challenge and attention gets diverted, even if the challenge is in fact growing more serious. For many people interested in climate, it is a shocking realization that such a rich and relatively educated country as the US can wind up doing so many things wrong, through a combination of many climate change deniers together with a political system which assigns enough weight to powerful vested interests for them to substantially limit that policy even when the majority of people would indeed prefer that the country do somewhat more.

Although some people’s ideas are essentially based on deep-seated values or borrowed from the group of which they are a member, for the majority beliefs are not totally set in stone, so exposure to evidence related to global warming can have an influence. Most people rely on others presumed to have more information and who present it in accessible language, especially the mass media. Unfortunately, describing the world accurately is only one media objective; they also seek profits by maximizing audience share, as well as by conforming to the interests or values of their owners or advertisers and persuading clients of those views. The mass media in democracies tend to range across the political spectrum. Beyond any political leanings that affect their take on global warming, most prefer to frame stories dramatically (e.g., as impending dangers or as controversies with two sharply opposing sides) and to report “breaking” news stories in preference to talking about more enduring phenomena. Some American mass media have, at times inadvertently but at times quite deliberately, promoted the view that what are uncontroversial aspects of climate change among scientists are matters of serious scientific debate. One side of a so-called controversy may consist of the predictions of environmental organizations and scientists of climate-caused catastrophes, such as famine and political instability in developing countries, loss of species and ecosystems, and new public health disasters.31 This narrative emphasizes elements of dread and unknown risk, which induce concern and make for a dramatic story, though sometimes going beyond what some scientists consider defensible. The “other side”, presented mainly by the less serious media, includes reassuring pictures of the future and critiques of climate science, cites the few legitimate scientists who are skeptics, and focuses a good deal on existing uncertainty about future climate events and their consequences. In the US it has been funded by major oil and gas companies along with wealthy conservative individuals, is largely designed by conservative think tanks and guided by Republican strategists aided by a small number of contrarian scientists, several of the most prominent of whom were veterans of an earlier, industry-funded campaign to downplay the health effects of tobacco smoke (Oreskes and Conway, 2010). Their main objectives are to maximize the profits of the fossil fuel sector and to minimize regulation, which they see as the likely consequence of a national commitment to contain climate change. An important part of the denialist framing has been to characterize the science as “uncertain” and to imply that “uncertainty” means that the global climate may not be changing significantly and that delaying any reaction to it is therefore prudent, since it is unwise to undertake expensive “fixes” to a problem that may not be very serious or even exist. The denialist movement has exploited the propensity in U.S. journalism to cover controversies by presenting its view of climate change as “the other side of the story.” In the 1990s, when the scientific consensus was less clearcut, the influence of this “scientific uncertainty” frame probably owed something to the economic pressures on news outlets, which were beginning to have fewer professionals with the time to develop informed judgments about which factual claims deserved serious coverage; that factor is no longer at play since one no longer needs to be conversant with science or its terminology to know how strong the consensus is or to get its main messages. In taking advantage of the human psychology of risk perception, the denialist narratives have questioned the accuracy of isolated pieces of evidence, with the implication that the entire construct of climate change may collapse like a house of cards.32 They portray the risks of climate change as natural, familiar, and not very severe. From about 1990 onwards, American conservative think tanks began to challenge the veracity of global warming and its seriousness as a social problem.33 They even argued that it could leave the world better off than before. Organizations such as the libertarian Competitive Enterprise Institute, conservative commentators, and some companies such as ExxonMobil have challenged IPCC climate change scenarios, funded scientists who disagree with the professional consensus, and provided exaggerated projections of the economic cost of stricter controls. Eventually some fossil fuel companies scaled back their efforts or softened the message, no doubt with a view to not getting so far from the facts as to become vulnerable.

6. The way ahead

The current constellation of world problems includes climate change that forces an increasing number of people out of their normal pattern of economic activity; competitive consumption which together with slowing economic growth and in some cases rising inequality, leaves many people unsatisfied with their status and future; and rising hostility to immigrants in most of the places they would like to go. Climate change is stoked by wasteful consumption. It imposes an especially heavy economic burden on Africa which, together with the region’s still rapidly rising population, creates the pressure for emigration to other places. If indeed the world is now approaching a downward inflection point after a century of striking progress, this package of problems is most likely responsible. While obviously not the only challenge, and in spite of progress made in responding to it, climate change is the biggest one.

In their Dec. 2018 comment on where we stand, Figueres et al (2018) note an impressive list of advances on the climate front. These include:

i) Moving towards decarbonizing the economy by 2050. “The world is quickly and irrevocably moving towards a clean, cheap and reliable energy system. Over the past decade, the costs of generating solar energy have plummeted by 80%. … “Today, more than 50% of new capacity for generating electricity is renewable, with wind and solar doubling every 4 years. …..If these trends continue, renewables will produce half of the world’s electricity by 2030.

ii) Advances in battery technology which are propelling a wide uptake of electric vehicles. “Though such vehicles are still a small fraction of those sold worldwide, that is changing, with Norway, France, the United Kingdom, the Netherlands and India having set deadlines for the sale of non-electric new cars (2015 in Norway) and most major car manufacturers have announced either a complete shift to electric vehicles or plans for a transition.”

iii) Air pollution abatement, as people become less tolerant of particulate and noxious-gas emissions from coal plants, factories and cars.

iv) More and more carbon pricing. “In 2017, more than 100 members of the Compact of States and Regions reported average reductions in emissions of 8.5% below their base years. Twelve members achieved a 20% reduction or more. Global emissions could be cut by one-third by 2030 compared to current national policy pathways, if ambitious initiatives such as the Under2 Coalition, RE100, C40 and the Global Covenant of Mayors all meet their goals.”

v) Increasing action at the subnational level. The nationalistic impulses that have emerged in some countries are being counteracted by support for climate action in cities, regional governments and the private sector. “Globally, more than 9,000 cities and municipalities from 128 countries, representing 16% of the world’s population, have reiterated their commitment to the Paris agreement through the Global Covenant of Mayors. So have 245 state and regional bodies from 42 countries, which are home to 17.5% of the global population. Most US citizens live in a jurisdiction that still supports the Paris goals. If all of these US cities, states and companies stick to their emissions-reduction pledges, they could put the country within striking distance of the Paris commitment made by the Obama administration, irrespective of current federal action.”

In light of this impressive list of achievements, plus others, it may seem unduly pessimistic to conclude that, in boxing terms, the planet is “on the ropes”. But that is the undeniable conclusion one draws from the current evidence. Had the cited advances all begun 25 years earlier, or had they been pursued more vigorously, we would not be in this perilous situation. What these positive trends portend is that a zero net emission of GHG state of affairs can be predicted for this century. In what state the planet will then be depends on how soon we fulfill that condition and on whether we have by that time been able to successfully utilize the alternative of geoengineering to curtail the atmospheric level of GHGs.

In terms of what must, should and can be done to confront the global warming threat, the broad options include consuming (and hence producing) less goods and services; consuming in a more environmentally friendly (green) way; curbing GHG emissions through the range of pricing and related policies that are useful to that end; and the introduction of new technologies, both to reduce emissions, to capture CO2 from the air, and perhaps even to engage in solar radiation management. Part of the recent debate has revolved around whether the needed changes (say to limit the post-industrial revolution increase in temperature to 2 degrees centigrade) can be achieved without major technological advances, and another part around whether we place too much confidence in technology and hence worry less about the first (conservation) approach than we should. The most likely answer to the first question is that technically we could but politically we cannot. The most likely answer to the second is that technology, used well, should be able to provide great benefits.34

Erroneous beliefs about the economic costs of doing as much as we can without resorting to geoengineering will remain a major challenge–an area where rapid progress might make a big difference to policies and outcomes. The common but incorrect beliefs that slowing global warming will force an increase in taxes and thereby lower people’s incomes, raise prices, cut jobs, make a country internationally uncompetitive, and lower economic growth all need to be confronted—in most cases to demonstrate their untruth, in others to put them in perspective in quantitative terms, e.g. in relation to world GDP. The employment issue is simple; there is no reason to expect any net job loss unless climate policies are introduced very abruptly and without appropriate support. Some people will lose their current jobs and have to find others, though the number will be a small share of the total job-switching that occurs in an economy in a given year.35 Still, facilitating job shifting is important in this and in many other settings, if only for the confidence that it provides to people. Systems like Denmark’s “flexicurity” would be natural tools here, to both decrease the direct costs to a worker of job loss and also to help that worker (through appropriate training, for example) to get another job.36

Achieving what is necessary will depend on a better understanding both by people and by their politicians of what good policy entails, on leadership and pressure from other groups encouraging people and politicians to do better and, probably, on international pressure from those who are doing their part onto those who are not. It is clear that the majority of most populations will not soon get to a close understanding of the issue and will not be offering to donate large amounts of money to help to resolve it. Increasing numbers of people and groups will, however, become engaged in helpful activities, ranging from shifting to greener consumption to developing better technologies for agriculture, small business and other activities. But, as with public sector spending on the military, or on health, education and infrastructure, the key decisions must be made centrally; people’s willingness to donate or participate does not directly determine spending in any of those areas. How much public spending will be needed to ward off the climate threat is key. And since that amount, correctly calculated, will be low, say 1-2% of world GDP, a central messaging task is to explain why this is the case. This message is essential, not just because the vested interest opponents of serious global warming policy exaggerate the true economic costs, but also because most of the populace may naturally assume that overcoming such a large challenge as we face must come at a high cost. Thus Gardner (2018), contends that a strong policy response to global warming cannot become popular in publics used to dealing with immediate challenges, and to confronting large ones only when they are immediate. The problem is not selfishness or ignorance/disinterest, but that evolution prepared us this way. He argues that confronting the most dangerous CC scenarios requires “economic and social changes so fundamental that they cannot happen in a democracy without broad popular support for collective action. The only precedent for such mobilization is wartime.” But on the matter of economic costs and the related social dislocation, he is far too pessimistic. World War 11 forced belligerents to allocate over 40% of their GDP to that use; climate change might cost one twentieth as much. They are simply not comparable. Very likely most people would be happy to voluntarily contribute modest amounts (say 2-5% of income) if they really believed it would determine whether their children had a decent life, but they will not have to. Most climate change spending must be an executive decision in democratic countries, as it is by definition in non-democratic ones. Much of the needed investment in R&D is part of broader budgetary categories. Much of the response to the damage wrought by global warming, say strengthening of infrastructure, will not be controversial. The main part that has been and will be controversial is the penalization of the industries and types of behaviour that contribute to the problem.

For most people, understanding the modest economic cost of dealing adequately with environmental challenges involves several main points. The first is distinguishing true costs from apparent ones, like the shifting of investment that would have occurred in coal-based energy plants to green ones where the latter technology is just as cheap and efficient. Second is to recognize that when some activities are discouraged the costs incurred by some people and industries are almost always at least partly offset by gains to others, as where the coal industry shrinks but as part of the same process the green energy sector expands. Third, cost figures should always be compared to a relevant base, like GDP, since otherwise it is impossible to distinguish large numbers from small ones. Even tiny amounts in relation to the world economy amount to billions of dollars; to exceed 1% of world GDP they must be in the trillions. As indicated, the best available figures indicate that global warming could be dealt with effectively by allocating 1-2% of world GDP to it; the resulting gain would be enormous, probably lying in the range 20-60 times the cost. Finally, many economic activities yield very little net benefit in economic terms, and the benefits from them go to relatively well-off people. The phenomenon referred to as the “natural resource curse” falls in this category; as demonstrated by many studies, extractive industries like oil and African palm yield smaller benefits to the economies of which they are a part than appears from their output numbers. Where such activities are also damaging to the environment, the loss is especially likely to outweigh the economic gains, since these latter are small. Cattle grazing on former Amazon forest land is one of the notorious examples of this big loss for small gain trade-off.

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Endnotes

1 Their model draws on the empirical estimates by Dell et al (2012) of the impact of inter-annual temperature variability on national economic output and growth rates.

2 Like Dell et al (2012), they conclude that the economies of rich countries will continue to grow reasonably well in a warmer world.

3 The 2018 UN IPCC report (United Nations, 2018) estimated that global warming to 2.7 degrees F (about 1.3 degrees Celsius) would cause $54 trillion (net present value) in damage and that the world is likely to hit that average temperature increase unless its governments halve emissions by 2030. Current (2018) world GDP is $87.5T (or $132T in purchasing power parity terms). At an annual growth of 2.5%, world GDP in 2030 would be $117.7T ($177.5T in PPP terms).

4 A more complete measure of economic performance would be GDP adjusted for the economic costs of some (or all) of the damaging impacts of global warming, such as the need to spend more on air conditioning, the health problems resulting from high temperatures, etc. (See Berry, forthcoming, for more details).

5 Meanwhile scientists are trying to confront the massive die-off of coral by creating hardier varieties. How fast this will proceed is of course hard to gauge.

6 In May 2013, the US government revised its estimate of the SCC from $22 per ton of carbon dioxide emitted to $37 per ton. The new figure was based in large part on the average of the estimates from then-current economic models.

7 E.g. as long as the benefits from emitting less GHG exceed the cost of applying the policy.

8 It must also be noted that the total mitigation-related outlay would be higher in up-front years when a burst of new investments were being made in green technology.

9 If, for example, spending corresponding to category (a) were 0.2% of GDP, that to category (b) 1.0% of GDP and that to category © 2% of GDP, and if within category © spending the average extra cost entailed by the CC objective was 25% above the least cost alternative, then of the 3.2% of GDP that would be attributed to CC policy if all of the cited spending were included, the true cost of that CC policy would be 0.52% of GDP (all of category [a] and 25% of category ©), i.e. about one-sixth of the former figure.

10 The methodology appears to be equivalent to that implicit in the above discussion.

11 Judging by the Ritchie and Roser (2017) estimate of 0.5% for 2015.

12 Biggers (2010) estimates that over the first decade of this century 10,000 coal miners died from health problems related to their activity. Total deaths clearly linked to the nuclear power industry have been much fewer, at least in the post-Chernobyl era. Known cases are around 100, but most of the total will have been due to cancer and occurred later, making it hard to be precise.

13 Like the other energy sources, nuclear will always have its dangers, especially when plants are run by different groups, not all of which will be as careful and technically competent as they should be. Then there are the highly unlikely events like the earthquake-tsunami’s triggering of the Fukushima disaster.

14 Although the marginal cost of reducing emissions is still much less than that of taking carbon from the air, the maximum achievable through the former route is unlikely to be enough to resolve the problem by itself, given the late start. Early warner and popularizer of the phrase “global warming” Wally Broeker believed that no amount of emission reduction could alone reverse the warming trend; in his view this would only happen if carbon capture greatly improved (Broeker, 1975).

15 Residential solar heating using roof-top panels is increasingly cheap in the US and elsewhere, although its adoption has been slowed by regulations and by the fact that it is an unstable source over time, requiring either storage or connection to a grid; in the latter case the appropriate charges are a matter to be worked out.

16 Direct air capture will not for some time be economically competitive with restriction of emissions, whose cost per ton prevented can be far lower than the current estimates of SCC. But because political obstacles stand in the way of emissions reduction, the next most efficient—greenhouse gas absorption, becomes economically advantageous in the sense that its cost is below the benefits it provides.

17 The Economist (2018).

18 The Economist, May 25, 2019.

19 The third approach to dealing with global warming is the much grander and more theoretical climate engineering, through steps like blocking out sunlight. Since it is still on the drawing board, both feasibility and probable cost are impossible to judge with accuracy. But Morton (2015) discusses the options in this new area. A US National Academy of Sciences (2015) report on a 21 month project concluded that “Climate intervention is no substitute for reductions in carbon dioxide emissions and adaptation efforts aimed at reducing the negative consequences of climate change. However, as our planet enters a period of changing climate never before experienced in recorded human history, interest is growing in the potential for deliberate intervention in the climate system to counter climate change. …Carbon dioxide removal strategies address a key driver of climate change, but research is needed to fully assess if any of these technologies could be appropriate for large-scale deployment. Albedo modification strategies could rapidly cool the planet’s surface but pose environmental and other risks that are not well understood and therefore should not be deployed at climate-altering scales; more research is needed to determine if albedo modification approaches could be viable in the future.” Albedo modification refers to reflection techniques whereby the earth or the clouds are able to reflect more of the sun’s rays back into space.

20 They disagree with the one prior comprehensive study on the topic (McClellan et al 2012) in concluding that no existing aircraft design, even after extensive modifications, could fulfill this mission.

21 Data related to land use and forestry are usually accounted for separately because they are less precise and show large variations from year to year (Olivier et al, 2017)

22 See Ritchie and Roser (2017).

23 The share of electricity from large hydroelectric projects—excluded from these investment figures, has fallen since the 1980s and remained about constant at a little under 20% (Ritchie and Roser, 2017, 18).

24 The theory is simple but its application less so. The basic economic idea is that any damaging activity like greenhouse gas emission should be penalized by an amount (which can be called a tax) equal to the damage it does. This same theory applies to any other negative externality for which private agents (people or businesses) are responsible, such as polluting the air in a city, creating loud noises at night in a residential neighbourhood, and so on.

25 The reduction of subsidies to fossil fuel industries also helps to get prices properly aligned and improves government budgets, in this case by cutting expenditures rather than increasing revenues.

26 The aversion to taxes is particularly American, whether due to the greater strength of right-wing conservative politicians who support free markets and small government, the more successful distorters of the facts, or whatever else sets American politics apart from the other industrial countries. But it is in some degree present in other countries as well, and notably so in Canada and Australia.

27 While the use and negative impacts of oil could be blamed on the importing country, some moral responsibility presumably remains with the exporting country, as in the cases of countries that export addictive drugs, weapons of war, or other socially damaging goods. But this case is more complicated, since up to a point the use of the product is both inevitable and innocuous.

28 Murdoch’s Sky Australia played a prominent role in this process, through its Fox-News type emphasis on race, identity and climate-change denial (Mahler and Rutenberg, 2019, 54).

29 The Economist (2019).

30 How the stances of business and those of politicians and governments evolve over time differ for several reasons. The balance of stated views from business on the issue of climate change is moving positively in most if not all countries. Norway’s famous sovereign wealth fund (with holdings of $142B) has planned to sell off its 5.7B in oil and gas stocks, but a government-appointed committee recently recommended against its doing so. The issue is currently under debate.

31 Advocates have publicized vivid images of the future they fear, in films such as An Inconvenient Truth (David, Bender, Burns, & Guggenheim, 2006) about Al Gore’s campaign to educate people about global warming. They have also emphasized the growing scientific consensus about many climate change conclusions and the human responsibility for climate change.

32 In the fall of 2009, denialists publicized a few errors in the 2007 IPCC report and some e-mail correspondence between individual climate scientists that appeared to suggest the selective and biased reporting of climate data. Despite rebuttals of charges of a climate conspiracy, continued allegations have helped the denialist movement to block national policy action in the United States since the 1990s. The report of the United Kingdom’s House of Commons Science and Technology Committee (2010) cleared the University of East Anglia’s Climatic Research Unit from any charges of tampering with data or perverting the peer review process to exaggerate the threat of global warming. A review by the InterAcademy Council (2010), a group of 12 National Academies of Science, prompted in part by the revelation of errors in the IPCC assessment, found the IPCC’s review process sound and thorough, but recommended stronger enforcement of existing review procedures to minimize future errors.

33 The misrepresentation engaged in by ExxonMobil, for example, has been, to put it mildly, dramatic (Supran and Oreskes, 2017).

34 As argued, for example, by Gertner (2019).

35 Recent data from the US Bureau of Labor Statistics show that the average man changes jobs every 4.3 years and the average woman every 4.0 years. Thus about 25% of the labour force changes jobs in a typical year. Were adjustment to climate change to cause the loss of 2% of the labour force in a given year, this would thus constitute about a twelfth of the total shifting going on. In some countries the forced shifting will be greater, probably including Germany as it undertakes the major planned shift towards green sources of energy. But this job cost as part of prevention will be far less that the cost borne in future in those coastal regions from which people are driven by the effects of climate change; the latter is the cost of failing to prevent.

36 This system, pioneered by Denmark in the 1990s, is now the approach favoured by the European Commission.