Home » Uncategorized » What Economists Think About Climate Change, Part 1

What Economists Think About Climate Change, Part 1

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It is always a risky to talk about what other people think, but economics is a profession in which certain kinds of facts are accepted and certain ideas have been carefully worked out. It is fair to say they are accepted by the vast majority of people in the field. You don’t need to take a poll to say what an economist, as economist, believes about many issues. You need to know what economics tells them to believe.

I am a respectable economist trained in two of Canada’s best schools and with 30 years experience teaching and doing research. I have paid a lot of attention to what economists have to say about climate change. This essay is a summary for non-economists.

There is quite a lot to say, so I will be posting a series, starting with what we believe about climate change itself, then going on in later blogs to
– What Most Economists Believe About the Financial Aspects of Climate Change,
– What Economists Believe about the Costs and Benefits of Climate Change,
– What Economists Believe About What We Can Do About Climate Change, and
– What Economists Believe About the Economic Tools We Can Use to Respond to Climate Change.


To start with, most economists believe that climate change is real. In fact I am sure most economists believe anthopogenic climate change is real.

How can I say most economists believe in anthropogeneic warming? Because economists are professionals and they have learned to trust other professionals. Economists don’t take out each other’s tonsils, and they don’t look to other economists to learn about the effect of methane release in the Arctic Ocean. Economists have some scientific training and are willing to trust the vast majority of climate and atmospheric scientists on this issue.

Economists understand the limitations of their own training. They know that an economist talking about climate change has no special expertise about climate change itself, how it works, how fast it is happening, or what it will do to the earth. Their specialization is in how economies work and how people respond to economic incentives.

Economists are not alone in respecting the scientific consensus. The CIA, in its 1014 Quadrennial Defence Review writes “Climate change poses another significant challenge for the United States and the world at large. As greenhouse gas emissions increase, sea level sare rising, average global temperatures are increasing, and severe weather patterns are accelerating.”

The business press, which relies heavily on economists, treats anthropogenic climate change as established fact as well. The highly respected Economist Magazine, for example, in September 20th 2014 ran a piece titled “Curbing climate change: The deepest cuts: Our guide to the actions that have done the most to slow global warming.” In Canada the Globe and Mail and the Globe’s Report of Business take for granted the role of human carbon emissions in causing dangerous warming. It is worth noting that the business press is quite distinct from the economics profession, although and has a much wider influence on people interested in economic affairs. In general business and the CIA) look to economists, not for facts about climate change but insight into how climate change will affect the economy and how economic policies can reduce the danger from climate change.

Most economists believe the climate scientists when they say that there is a level of warming – probably around 2 degrees centigrade – after which the risks to ecosystems, species, food supply, and human populations probably increase a lot. This is also not economics, so economists as a rule defer to The experts, As a result, most economists believe that we can’t keep burning carbon at the rate we have been without endangering major ecological systems.

More specifically, most economists believe that we will not be able to burn all the carbon that the carbon companies have listed as assets on their books. Economists tend to be convinced by clear quantitative explanations based on easily verified facts. One of the most convincing and accessible versions is in Bill McKibben’s July 2012 Rolling Stone article, Global Warming’s Terrifying New Math. McKibbon summed up the matter with three numbers that most economists would find convincing.

1. The First Number: 2 Celsius, from the Copenhagen climate conference in 2009 

The 2009 Copenhagen accord formally recognized ”the scientific view that the increase in global temperature should be below two

degrees Celsius.” And in the very next paragraph, it declared that ”we agree that deep cuts in global emissions are required… so
as to hold the increase in global temperature below two degrees Celsius.” (NASA scientist James Hansen, the planet’s most prominent climatologist, thinks this number is too large: ”The target that has been talked about in international negotiations for two degrees of warming is actually a prescription for long-term disaster.”)

2. The Second Number: 565 Gigatons

Scientists have calculated that humans can pour roughly 565 more gigatons of carbon dioxide into the atmosphere by midcentury and still have some reasonable hope of staying below two degrees. At the 2012 emission rate of 34.5 billion tonnes per year we’ll have used up the 565-gigaton allowance by 2030.

3. The Third Number: 2,795 Gigatons

The number describes the amount of carbon already contained in the proven coal and oil and gas reserves of the fossil-fuel companies, and the countries. In short, it’s the fossil fuel we’re currently planning to burn. And the key point is that this new number 2,795 is higher than 565. Five times higher.

Economists like to use what we call “back-of-the-envelope” calculations to check whether the answer to a question is a clear ‘yes,’ a clear ‘no,’ or close to the line. What these numbers show is that there really is a huge oversupply of carbon. The numbers tell us clearly that
– No we can’t burn it all.
– Yes that means some of the carbon will have to stay in the ground.
– No, the carbon companies will not like that conclusion. Nor will shareholders, who will discover that part of the wealth they hold in energy companies is actually imaginary.

This has financial implications for the global economy. I will talk about them in the next post.


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