I have just come across the article “An Economist’s Guide to Climate Change Science“, written by Solomon Hsiang and Robert Kopp, published recently in the Journal of Economic Perspectives, Fall 2018. They mainly summarize the recent literature on climate change and provide some insights from economists on this topic. Should you read their article? What is missing from it?
Their main take-home message is the following:
” Essentially all humans that have ever lived contributed, in their own small ways, to reshaping this planetary-scale system. Thousands of years of forest clearance may have added hundreds of billions of tons of carbon to the atmosphere. In the industrial era, every home lit by a coal or natural gas-fired power plant and every petroleum-powered train, plane, and motor vehicle has contributed to the net accumulation of carbon dioxide in the atmosphere. The average human contributes about 5 tonnes of carbon dioxide (CO 2 ) every year (Le Quéré et al. 2018), about a quarter of which will remain in the atmosphere for well over a millennium (Archer et al. 2009).”
So for whom is this article interesting? I would say for an economist who has no idea about climate science and would like to get a quick introduction. Overall this is a concise and well-summarized exercise of what we know about climate change. If that was the sole intention of the authors, then it is a job well-done. However, I have to say that I was a bit disappointed, as I was hoping for something else. So roughly all the points in this article can be found in the summary for policymakers of the IPCC report. You may have to do some more side-reading in order to e.g. know about the historical and top 15 countries that currently emit CO2, or how the US states are affected. But I guess this is not vital information for economists in general.
So what is missing? In my opinion it is the economists part that is missing. What would an economist be interested in, really?
Well, a theoretical economist would want to know what simple model would be able to well-capture the latest state-of-the-art climate change science. Basically, how does economic modeling capture, in the best possible way, the carbon cycle? What are the shortcomings of such a model? Where do we stand in terms of multiplicity of equilibria, or indeterminancy? How is this carbon cycle affected by mankind? How do we model this? This would have been the section where economists would know inhowfar the climate science impacts their modeling and research approach.
For example, most research in environmental economics has always assumed that there is a significant lag between temperature rise and carbon emissions. But we do know now that this lag is not all that long, and after roughly 20 years we already see the maximum temperature impact of a currently emitted amount of carbon. Questions that I would have liked to see answered in this article would have been: what does this mean for an economist when it comes to the modeling of intergenerational issues? What tools are needed to study this? How does this change our commonly-accepted results? And of course many more…
One section that I was very much looking forward to was “How economists can help climate science”. Here the authors talk about the Socioeconomic Pathways, basically forecasts interlinking scenarios about economic growth and the transformation of economies with the carbon emissions that we expect from that. It would have been much more interesting to really get an insight into what economists can do here, what kind of forecasts are still needed, who works on this, etc. While the authors shortly go over this, I feel that a much more detailed analysis here would have been very useful for economists in general. I have also come across the name Hsiang quite a lot when it comes to references about work in various areas. It would have been nice to have also received some information about other people who work on these or similar topics. I hope these short thoughts inspire an economist to write about the issues that I raise here.
I certainly agree on the part that “a theoretical economist would want to know what simple model would be able to well-capture the latest state-of-the-art climate change science.” For example, state-of-the-art in climate science confirms that a carbon budget, that is, cumulative total emissions over the 21st century, are a good approximation of peak warming. This means the problem of efficiently limiting warming (to a temperature target, such as in the Paris Agreement) reduces to exhausting a carbon budget. I thought it is strange that this was lacking from the article. Integrated Assessment Models, such as used by IPCC WG3 have used this logic for a long time. But it seems indeed, environmental economists, are less aware of it, but see: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2017/11/Working-Paper-283-Dietz-Venmans.pdf
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