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Last month, the Intergovernmental Panel on Climate Change, a UN-created body that is tasked with studying and reporting on climate change’s global impact, came out with a rather depressing report. (Here’s the full report and a detailed-yet-readable summary). The report tackled how Earth’s climate has already been affected by greenhouse gas emissions (a fair amount), how it will continue to be affected (more and more), and what we can do about it (not nearly enough). In the interim, there have been a series of articles and posts exploring the economics of climate change.
This week in the New York Review of Books, Paul Krugman runs through the various estimated costs of climate change on the planet over the next 200 years as he discusses fellow economist William Nordhaus’s book, “The Climate Casino: Risk, Uncertainty, and Economics for a Warming World”. Nordhaus advocates for a global carbon pricing system ASAP and Krugman agrees.
Despite the complexity of the climate problem, Krugman thinks “much of the standard textbook analysis ought to apply. And what this textbook analysis says is that the best way to control pollution is to put a price on emissions, so that individuals and firms have a financial incentive to cut back”. Yet, Krugman argues that finding an economic solution to climate change isn’t the problem — the problem is convincing climate change deniers.
Last month, researchers in Europe put out a paper that concluded climate change is already costing the world more than $1.2 trillion per year. The Asian Development Bank announced last week it estimates the effects of climate change will shave more than 5.3% off of annual GDPs in the region by 2100.
Tim Fernholz says that climate change is already having some odd economic effects, including the death of the popular $1 McDouble cheeseburger. McDonald’s announced Monday that it was changing its Dollar Menu to the “Dollar Menu & More”, in order to increase the prices of many of the items on the list. Fernholz links rising fast food prices to rising cattle (and therefore beef) costs due to drought.
Andres Velasco, the former finance minister of Chile, points to the economic impact of ocean degradation, noting the marine ecosystem is worth an estimated $21 trillion per year — and that’s a 15-year-old estimate. This is particularly problematic, he says, because:
Degradation is particularly serious in the one substantial part of the world that is governed internationally – the high seas. These waters are outside maritime states’ exclusive economic zones; they comprise two-thirds of the oceans’ area, covering fully 45% of the earth’s surface.
Meanwhile, Harvard is in the middle of a very public battle between its students and the administration over the University’s decision not to divest from the fossil fuel industry. The debate highlights the question over what the “proper role for individuals and institutions in addressing climate change”, writes Harvard professor Robert Stavins. He concludes, “Voluntary initiatives – no matter how well-intended – will not only be insufficient, but insignificant relative to the magnitude of the problem” — therefore, the only way for Harvard to contribute meaningfully is through “research, teaching, and outreach to the policy community”. — Shane Ferro
On to today’s links:
Wall Street-as-landlord: “When unpacking their belongings … they found rat feces in the dishwasher” – HuffPo
Earlier: Investors are pouring billions into the latest hot housing asset, rentals – Bloomberg