Climate Economics

Overview

A growing sense of urgency surrounds the problem of global warming, as the scientific evidence becomes steadily more ominous and compelling. Indeed, as the climate skeptics sink into obscurity, conventional economic analysis is fast replacing them as the leading argument against vigorous, near-term climate policy initiatives. A handful of widely cited economic models and analyses are often taken as having “proved” that climate change mitigation would be impossibly expensive. Cynicism about the cost of government initiatives in general feeds into the new economic arguments for inaction. Moreover, many people may informally suspect that a little warming might not be so bad – an argument that is reinforced by several leading economic studies that identify near-term benefits from climate change.

As in other areas, environmental advocates are often much better prepared to address the science than the economics of the issues they are working on. As the grounds of the debate are shifting, there is a need for development of a progressive economic analysis of climate change. To counter the argument that doing anything about climate change is prohibitively expensive, SEI-US in collaboration with the Global Development and Environment Institute (GDAE) seek to reframe the debate.

The Costs of Inaction:

The costs of climate inaction – the difference between costs under the “business-as-usual“ scenarios of the IPCC reports and an optimistic “rapid stabilization” scenario – are the human, economic, and environmental damages that may be avoidable with vigorous, timely actions to reduce greenhouse gas emissions. An increasingly common argument is that it will be expensive to do something about climate change; our research demonstrates that it will be much more costly to do nothing about it. The research team has undertaken a number of focused studies on different geographic areas to estimate the locally specific costs of climate inaction.

Toward a New Climate Economics:

Several recent articles and reports examine the economists’ debate about the Stern Review, the challenge of climate change for conventional economic theory, the conflict between scientific and economic analyses of climate change, and the shortcomings of some of the well-known “integrated assessment models” of climate and economic growth.

Economics for Equity and the Environment :

Our research team -- Frank Ackerman, Elizabeth A. Stanton and Ramón Bueno -- is actively involved in Economics for Equity and the Environment (E3) and its Climate Economics Taskforce. This group joins together professional economists from academia, think tanks, and NGOs for the purpose of establishing an integrated response to climate change that is firmly rooted both in science and in E3’s commitment to social justice.