NYU Study: Economics Of Climate Change Is A No-Brainer

As shown in numerous polls, most people in the US and elsewhere are concerned about the ecological effects of anthropogenic climate change. However, another aspect of the phenomenon will impact the stability of human systems around the globe more immediately than profound environmental changes. That is the economics of climate change. A new study by the Institute for Policy Integrity at the New York University School of Law casts needed light on the socioeconomic factors and indicates consensus among economists on most critical subjects. It also reinforces a wider statement made by 2,500 economists almost 20 years ago, in 1997.

Peter Howard, economics director of IPI, and Derek Sylvan, strategy director, wrote about the survey methods in the New Year’s issue of The Hill:

“In the lead-up to the Paris conference, we surveyed a large sample of expert economists–all those who published an article related to climate change in a highly ranked economics journal over the past 20 years. We asked for their views on likely climate change impacts and appropriate policy responses, and we received 365 completed surveys (roughly a third of the group responded – a strong response rate for this type of survey).”

The lists here represent all the major journals consulted, with specialist publications environmental economics listed below.

Environmental economics journals consulted (policyintegrity.org)

The IPI/NYU study came to four conclusions based on these summary data about the economics of climate change:

• Carbon pollution cuts are needed regardless of what other countries do,
• Climate change is already hurting the global economy,
• Climate change will hurt economic growth, and
• Carbon pricing is an efficient way to cut pollution.

A slew of clear graphics revealing the views of 365 expert economists accompanies the discussion.

Carbon pollution cuts are needed regardless of what other countries do.

More than three out of four economists agreed that the US should take action to limit global warming no matter what response other nations have. Another 18% declared that the US should follow the global norm if other countries decide to cut their own emissions. In other words, 95% of expert climate economists feel that the US should follow through with the carbon-cutting pledges we made at the international meeting in Paris last December.

Climate change is already hurting the global economy.

The survey asked when the economic benefits the world experienced up to 1980 would be wiped out, given business-as-usual pollution and existing climate change. The experts saw a GDP loss of 10% by the end of this century, and a 20% chance of a “catastrophic” loss of one-quarter of global GDP. Almost half (40%) of those surveyed felt that this had already occurred. Had Americans made necessary changes in the Carter administration of 1980, we might have preserved this financial progress. As it is, we now have to face the negative effects of the past 35 years.

Climate change will hurt economic growth.

A huge gap exists in our current economic forecasting according to this study. “Most current integrated economic-climate assessment models assume that economic growth will continue regardless of climate change impacts.” “Wrong,” say over three-quarters (78%) of economists counted in this study. Most expert economists agree that climate change will restrict global economic growth.

A major downside of this finding is that to date, the US government’s estimate for the “social cost of carbon” ($37 per metric ton) is likely way too low.

Not only will climate change (a 3% increase by 2090) hamper economic growth, say most economists, but it may also reduce global income indefinitely by 25% or more. This outcome would be similar to the effects of the Great Depression almost 100 years ago.

Carbon pricing is the most efficient way to cut pollution.

Getting a read on the most cost-effective means of decarbonization may be the greatest contribution economists have to make to the climate change conundrum. A huge majority (81%) of responders in this study of the economics of climate change found a market-based emissions trading system (carbon tax or cap and trade) most useful. This confirms the agreement of over 2500 economists (including nine Nobel Laureates) in the 1997 Economists’ Statement On Climate Change.

Only 13% of those polled in the IPI/NYU study said that we should leave the problem to prioritizing cleaner fuels and energy efficiency and coordinating performance standards. In the US, political divisions have stymied attempts to institute carbon pricing, the clear choice of the economists, the people, and many progressive leaders, including the President. Twenty-three individual states have created or joined market-based compacts to date. Price Carbon from Martenlaw indicates that nearly 50% of Americans and Canadians are now living in states with some sort of carbon pricing rule.

Other findings

In terms of the social cost of carbon from 2010 to mid-century, the IPI/NYU results overtop those of previous reports by a huge margin.

The study of economics of climate changeis also particularly revealing when compared to the results of a similar report from 2009 by the same institute. The recent study found that over 50% of economists thought that six major US economic sectors were most likely to be negatively affected by climate change.

The 2009 study revealed similar results, but at a lower order of magnitude. Primary findings indicate dramatic upticks in effects on the real estate industry and transportation; smaller increases in the analysis of agriculture, mining, fishing, forestry, construction, and manufacturing; no change in health services; and a slight improvement for the insurance industry.

None of the Democratic candidates for president of the United States argues with major climate change predictions. Unfortunately, Marco Rubio and many other Republican candidates have chosen to disagree with the calculated results. These conservative politicians seem determined to cling to the notion and spread a gospel that taking action against climate change will cripple the economy. Rubio has opined:

“THIS KIND OF UNILATERAL DISARMAMENT IN OUR ECONOMY IS RECKLESS, AND IT IS HURTING THE AMERICAN DREAM.”

This study shows clearly that an overwhelming majority of economists are more concerned about the American reality. “If we fail to cut carbon pollution and instead continue with business-as-usual, it will badly stunt economic growth and may potentially lead to catastrophic economic consequences.”

Says Paul Krugman, Nobel Prize-winning economist and Distinguished Professor of Economics at the Graduate Center of the City University of New York:

“UNTIL VERY RECENTLY THERE WERE TWO HUGE ROADBLOCKS IN THE WAY OF ANY KIND OF GLOBAL DEAL ON CLIMATE: CHINA’S SOARING CONSUMPTION OF COAL, AND THE IMPLACABLE OPPOSITION OF AMERICA’S REPUBLICAN PARTY. …BUT THERE HAVE BEEN IMPORTANT CHANGES ON BOTH FRONTS.”

Krugman cites the visible shift in both mainstream Chinese attitudes and national policy, thanks largely to the poisoning of the nation’s air by fossil-fueled industry. As for the US political arguments, Krugman says that “denial and anti-science conspiracy theorizing” may not matter as much as previously thought, considering that new technology has fundamentally changed the economic rules of electric power generation.

“PRESIDENT CRUZ OR PRESIDENT RUBIO MIGHT SCUTTLE THE WHOLE DEAL, AND BY THE TIME WE GET ANOTHER CHANCE TO DO SOMETHING ABOUT CLIMATE IT COULD BE TOO LATE. BUT IT DOESN’T HAVE TO HAPPEN. I DON’T THINK IT’S NAÏVE TO SUGGEST THAT WHAT CAME OUT OF PARIS GIVES US REAL REASON TO HOPE IN AN AREA WHERE HOPE HAS BEEN ALL TOO SCARCE. MAYBE WE’RE NOT DOOMED AFTER ALL.”

From the IPI/NYU report:

“E CAN STILL SOLVE THE PROBLEM WHILE CREATING JOBS AND GROWING THE ECONOMY, IF OUR POLITICAL LEADERS WILL LISTEN TO THE ECONOMIC EXPERTS AND THEIR VOTERS. SO FAR, CONVINCING REPUBLICAN PARTY LEADERS TO LISTEN TO AN EXPERT CLIMATE CONSENSUS HAS BEEN A FRUITLESS TASK, BUT THERE ARE SIGNS THAT THE PARTY IS STARTING TO MOVE IN THE RIGHT DIRECTION.”

The 2015 Paris Agreement of 195 countries now gives Republican dissenters, formerly in the minority of this US political group and almost universally outshouted, a powerful new financial reason to support climate change measures like the President’s Clean Power Plan, and even to take a lead in suggesting new ways of curbing the negative effects of climate change through profitable enterprises.

Based in Chicago, Sandy Dechert is an energy, environment, and health writer who specializes in climate change. She studied at UPenn and the University of Kent and worked for groundbreaking environmental consultants (now part of CH2MHill) and a Fortune 100 healthcare company. A regular contributor to CleanTechnica and other online media, she has reported US and UNFCCC developments in depth. Sandy live-blogged in 2014 from COP20 in Lima, Peru, and plans to spend the first two weeks of December this year reporting from Paris.