The Potential Costs of Climate Change

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I’ve written about the economic cost of climate change before. Economist Tyler Cowen recently made a similar observation:

I am struck by the costs of climate change suggested in the UN’s Intergovernmental Panel on Climate Change report, hardly a source of denialism. Its cost estimate — “1 to 5% of GDP for 4°C of warming” — is relatively reassuring. After all, global GDP is right now growing at more than 4 percent a year. If climate change cost “only” 4 percent of GDP on a one-time basis, then the world economy could make up those costs with less than a year’s worth of economic growth. In essence, the world economy would arrive at a given level of wealth about a year later than otherwise would have been the case. That sounds expensive but not tragic.

And yet, Cowen recognizes that this may “not [be] the right way to conceptualize the problem.” Having opened his piece with recent examples of irrational responses to legitimate, if relatively minor, problems–Brexit in response to EU bureaucracy, Trump’s election in response to immigration and trade issues–Cowen explains, 

Think of the 4 percent hit to GDP, if indeed that is the right number, as a highly unevenly distributed opening shot. That’s round one, and from that point on we are going to react with our human foibles and emotions, and with our highly imperfect and sometimes corrupt political institutions. (Libertarians, who are typically most skeptical of political solutions, should be the most worried.)

Considering how the Syrian crisis has fragmented the EU as well as internal German politics, is it so crazy to think that climate change might erode international cooperation all the more? The true potential costs of climate change are just beginning to come into view.

I’d say that we just need to educate people more, but given (1) the amount of political ignorance despite rising levels of education and (2) the general ineffectiveness of our education systems in this regard, I don’t think that will help much.