Citi GPS: Global Perspectives & Solutions released a study on the potential risks of climate and the costs to act to mitigate that risk. It will be interesting to see if Citigroup acts decisively on this to put its corporate heft behind changing national reluctance and policies on addressing climate change.
Charles Mann wrote an interesting review of several books on climate change in The Atlantic Monthly. He portrays the debate as “Environmentalists” vs. “Economists.” Unfortunately he describes economists as relying entirely on using central tendency expected values in standard cost-benefit analyses. And he fails to give economists full credit for creating the cap and trade system that he praises as an effective means of generating the change that is required.
The fact is that many economists are changing the debate on climate change to focus on deep uncertainty, to assess the costs of unlikely but catastrophic outcomes, to design effective technology subsidies, and to focus California’s climate change policies on global goals. All of these are important innovations that are affecting the debate over how to address the risks of potential climate change.
It’s important to recognize that we need to decide to act without full knowledge about whether climate change is driven by human activity or will it be of sufficient consequence to affect our civilization. If we live in a forest and there’s risk from a distant fire, we assess whether we need to buy insurance, clear brush around our house or evacuate. The fire may never come to pass–in fact the probability may be quite low, but we know the catastrophic consequences if it arrives. Is acting now to address climate change risk, both mitigation or adaptation, worth it? Economists have the tools to address this question–the problem is that key individuals in the media such as Charles Mann don’t seem to be aware of these, and so neither does the public or decision makers.