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Review of Climate Shock

Two Economists Take on Climate Change

Gernot Wagner and Martin Weitzman have written a book that will hopefully explain the threat of climate change and urgency of action in a way that even climate skeptics can appreciate the logic of it. They adapt the tools of economic analysis to not only understand why the debate is so intractable, but also show how those very same uncertainties should motivate policymakers and citizens to be more concerned and take more drastic action. Wagner is the lead senior economist at the Environmental Defense Fund. Martin Weitzman is an economist who has been studying climate change for years.

Uncertainty Makes Case For Action Stronger

The book touches on some of the main scientific takeaways of climate change, which should already be familiar to any casual observer of climate change. The predictions of climate scientists are based on computer models which obviously make lots of assumptions and are incomplete representations of complex phenomenon. However, there are some undeniable facts that we should never lose sight of and anchor ourselves to:

  • Since the dawn of human civilization, carbon concentrations have remained remarkably stable at around 280 ppm, and so have temperatures on earth, excepting some local anomalies like the Medieval Warm Period and the Little Ice Age
  • There is an extremely strong correlation between carbon concentrations and temperatures, based on 800,000 years of ice core records
  • The last time that carbon concentrations were as high as they are now, we have to go back 3 million years, well before modern humanity evolved. Sea levels then were 66 feet higher than they are today!

Based on these facts alone, I would argue that it’s clear we should be worried about how much carbon dioxide we are dumping. Of course, climate scientists are a lot more precise about how much warming is forecast, but there is still a great deal of uncertainty in the science. Probably the most important scientific uncertainty the authors cite is climate sensitivity, which is the number of degrees that the Earth is expected to warm given doubling of CO2 concentrations. The current best estimate climate scientists have arrived at is between 1.5 degrees Celsius to 4.5 degrees Celsius, and that estimate has been consistent for the last thirty-five years, despite all the advances in climate science. 1.5 degrees of warming is only twice as much as the warming we have experienced to date since the Industrial Revolution (about 0.8 degrees). Meanwhile, the World Bank issued a report emphatically declaring four degrees of warming must be avoided, and that it would result in hundred year heat waves occurring on a yearly basis.

It’s this uncertainty that motivates the authors’ case for climate action. The Intergovernmental Panel on Climate Change reports and the media tend to focus on the most likely range of temperature increase. However, that still leaves a nontrivial chance of temperature increases that are truly scary. On our current emissions trajectory, which the IEA expects will top out at CO2 concentrations of 700 ppm, Wagner and Weitzman calculate there is an 11% chance of experiencing six degrees of warming from preindustrial levels. This scenario is frequently cited as a nightmare scenario by climate change journalists. In one of the most memorable passages of the book, the authors ask what would we do if we knew that an asteroid had a more than 10% chance of hitting the Earth. Even if we forecast that the asteroid would not hit for at least a hundred years, they argue that we would not be spending time debating whether to do anything about that asteroid, or believing that we should do nothing because our technology would most likely improve to a point where destroying or deflecting the asteroid would be significantly cheaper. Any manager of financial risks would take a 10% loss of principal extremely seriously and either hedge their portfolio against that possibility or purchase insurance to cushion he loss. Yet on climate change, it seems like policymakers are content to do precisely nothing to avoid that scenario! A lot of people I have talked to believe that at some point in the future, we will think ourselves out of this problem, whether through some miraculous way of adapting or the discovery of a new energy source that can replace fossil fuels. As the authors retort, wishing for a miracle is not a plan, just like praying for rain is not a solution to drought. We have to make decisions based on the best current information, and the best current information says that, from a risk assessment perspective, climate change demands policy action that will force us all to consider the cost of burning more fossil fuels.

How do we currently arrive at such costs? Through integrated assessment models, which combine climate model projections, economic forecasts, and discount rates to arrive at a social cost of carbon. In the authors' words, several layers of uncertainty are combined together, which makes such models extremely imprecise. The authors also argue current assessments of carbon’s costs are too conservative because they focus on the most likely scenarios, rather than the 10% chance of catastrophe. Nonetheless, the best current estimate for what the social cost of carbon, and therefore the basis for any future price on it, is about $40 per ton of CO2 emitted. Wagner and Weitzman believe that is a good point to start.

Geoengineering Is Too Easy

The second main part of the book discusses geoengineering. Until this point, I had never taken it seriously. I always thought it sounded too reckless, too ambitious, and I thought it would be too costly. Wagner and Weitzman make a case for why it should be taken seriously and why scientists and policymakers need to discuss the ethics of deploying properly and in a controlled way. In this context, geoengineering primarily focuses on releasing sulphur dioxide into the atmosphere. The reason for this is that every way in which reducing carbon emissions is hard, geoengineering is easy.

First, current theory suggests you can get a lot of cooling effect for comparatively little sulphur dioxide. When Mount Pinatubo erupted in the early 1990s, it released 20 million tons of sulphur dioxide into the atmosphere, which lowered the temperature on Earth by an average of half a degree centigrade. In the author's words words, for one year, it reversed the effect of 585 billion tons of emitted CO2. Second, it is very cheap. They estimate that it would only take $10 billion to lower the Earth’s temperature by 1 to 2 degrees per year, an amount that is well within the reach of most countries. Third, it would only take a single country to do it for everyone to benefit. The authors consider geoengineering to be a “free driver” problem, whereas carbon emission reduction is a more classic free rider problem. In the free rider case, it costs each individual country a lot to reduce their carbon emissions, for comparatively little benefit that is spread across all countries and future generations. Geoengineering on the other hand costs each individual country very little, and the benefit to each country is fairly large. Given these properties, it is imperative that we have a serious and detailed discussion about geoengineering, in the same way that we should be having serious and detailed discussions about artificial intelligence and genetic engineering before they achieve widespread use.

What Can We Do

The last part of the book discusses what we can do. Each of our individual actions is probably too small to make a difference on climate change. No matter how much recycling you do, how many light bulbs you change, or how fuel efficient your car is, unless everyone does the same thing, it will not make a difference. In the words of David MacKay, who wrote an excellent book on the viability of replacing fossil fuels with sustainable energy, if we all do only a little, we will collectively achieve very little. Furthermore, the authors warn that individual actions will only work if it creates positive feedback loops that motivate other to change their behavior too. Their example of such a voluntary collective change in behavior is Copenhagen, half of whose citizens ride bikes as their primary source of transportation. The authors believe that sustained civic engagement and individual example-setting over decades got the city to that point, although others have pointed out that the city government made a significant push towards urban planning for bicycles, stiff fees on car ownership, and elimination of free parking.

The authors are concerned about a potential crowding-out effect: I already recycle and compost, so I do not feel bad about flying. Obviously, such an effect would be counterproductive if we want to bring emissions down as a whole. 

So like several other environmental advocates, the authors recommend that we need to make climate change part of our national conversation. To scream if we have to. Only when we put a price on carbon to limit its use and properly price it will the market react in a way that can show us a possible way forward. Most important, the price that should be chosen is the one that will minimize the chance of us reaching 6 degrees of warming.

Wagner and Weitzman go into much more detail about what else we can do: how to prepare for the change baked in, and how to profit from it. I cannot do it justice by attempting to summarize here. Luckily, this extremely important section of the book is excerpted in full in Salon.

If you are going to read just one book on climate change that is not alarmist and breaks the issue down very logically and coherently, I would highly recommend your read this one.

Other Great Reviews and Material From Authors

W&W on why we should vote and recycle more, even if the overall impact is very small.

Martin Wolf in the Financial Times. Good section on how the choice of discount rates makes a huge difference.

Summary of Weitzman’s arguments that international negotiations should focus on a carbon tax.

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