Anthropogenic climate change is a scientific fact. It may be regarded as the greatest challenge humanity has ever imposed over itself. Yet, it is an extremely complex challenge. It has, of course, a scientific component – without the advances in science, especially in climatology (but also, e.g., physics and geology), we probably wouldn’t be aware of the problem we face. Furthermore, as Kristen Sheeran rightly notes,
[m]any will argue that, at its core, the climate crisis is about ethics, rights, and responsibilities.
But, why is there economics of climate change? Do we need it? And if yes, what for?
It is clear that many issues arising while we are dealing with the climate crisis are not economic ones. The question of who is (historically) responsible for the changes, who should bear the most effort in mitigation and adaptation, what is our obligation toward future generations, what is the link between combating climate change and the right of poor countries to develop… All these, and many more, are problems related to economics, but not strictly economic. Ethics, philosophy, sociology may deal with them, perhaps much better than economists do. But, nevertheless, it is important that economists participate in the process of tackling climate change. Here we may quote Sheeran one more time:
But the drivers of, and solutions to, climate change are economic and political.
The first link between economics and climate change is, indeed, the fact that human economy has been the main driver of the latter. The formerly unseen success of especially the developed countries since the Industrial Revolution, but also of at least some of the developing countries in the nearer past, have put huge pressures on the Earth’s ecosystems. Here ethics plays a role again: one could say that we owe our affluence to our descendants – since we have used more that would be our sustainable share of the services and endowments Nature provides. On the one hand it cannot be denied that the last 200 years have greatly improved the well-being of the world population – this is a very important, yet not closed achievement. But, on the other hand, the environmental costs of this development are, as we now realize, severe. Biodiversity loss, climate change, desertification are only a few examples of ecosystem damages caused by their overuse which has fueled the world economy. In the case of global warming, signs of this overuse have been especially: the burning of fossil fuels, the intensive agriculture and deforestation. All these effects belong to the domain of economics, since they have been caused by our pursuit of wealth.
Since economy appears to be the main driver of climate change, it is logical that it is also the area where we should seek solutions. But, at the same time, we shall not forget that economics is only a part of the solution – many politicians and, indeed, economists, seem not to recognize that. Mainstream economic models of climate change are highly problematic in their methodology, since they tend to reduce all damages due to climate change to monetary ones (and to omit those which cannot be monetized). As I already have shown, this often leads to underestimating the severity of the potential consequences of business as usual. Problems of the appliance of cost-benefit-analysis, discounting considerations, treatment of uncetrainty… are at least partly caused by a tendency to overextend the scope of economic analysis, where e.g. ethics should be applied.
So, what are the tasks of economics/economists when dealing with climate change? Again, Kristen Sheeran put it well:
Economists, therefore, can contribute to the global effort to mitigate climate change by: translating the climate science into economic impacts [as far as it is possible and feasible – BB]; designing policies to stimulate the transition to greater energy efficiency and clean energy; demonstrating the benefits [as well as the potential dangers – BB] of building a clean energy economy; documenting the costs of alternative paths in the transition to clean energy; and informing equitable public policy interventions to distribute transition costs fairly.
I would add, further, the task to demonstrate (using, e.g., game theory) that global joint action is needed and in the interest of every country – i.e., that free-riding doesn’t pay in the long run (a very important issue when one considers the failure of past climate negotiations to reach a productive compromise).
We may conclude that, indeed, the economics of climate change has a “right to exist” (though not necessarily in its “mainstream” form) and that we need it in the global effort to tackle the anthropogenic climate change. To achieve this, economists must work together with scientists, politicians, ethicists, philosophers and other stakeholders – i.e., with the whole society. Unless we all cooperate, we probably cannot avoid a catastrophe.