The scientific community is at forefront of raising alarm about climate change and providing incontrovertible evidence. Evidence The link to human activity. Yet, economic policies to reduce carbon emissions continue to lag behind the urgency and warnings. The lukewarm response from the economic policy community to the climate crisis is a sign of the gap between knowledge and action. Some excellent ResearchMainstreaming is still a viable option, EconomicsIt has not taken climate change into account in its growth calculations. Part of the reason for this is the fear that strong climate actions will reduce short-term economic development.
Climate action isn’t free. According to one estimate, investments of $1000 are required for climate action. $3.5 TrillionTo limit global warming and reach net zero carbon emissions by 2050, it will be necessary to achieve this goal annually. 1.5 degrees Celsiusto lessen the likelihood of catastrophic climate event. The economics of externalities and spillover harm reveals that the cost of ActionIt is much lower than the carbon and climate CostIn the case inaction.
Mainstream economics must move in line with climate science if it is to make climate action a reality.
Evidence linking cause and effect is key to finding solutions for difficult problems such as HIV-AIDS and terrorism. Scientists have been able to see the connection between cause and effect. Connect the dots in the climate change ecosystem—greenhouse gas emissions, rising temperatures, sea level rise worsening floods and storms, and heatwaves aggravating fires (see Figure 1)—but cautious in attributing individual events to global warming. But New studies are doing just that—concluding that the extreme heatwaves in SiberiaWithout climate change, the Pacific Northwest would not be possible in 2021. Or that climate change has made it possible.The 2021 extreme rainfalls and floods in Belgium GermanyMore likely and intense.
Figure 1. Figure 1.
Source: Author’s illustration.
Taxing carbon emissions is economically necessary because of the economics associated with negative externalities. There are around 40 countries that have initiated this tax. carbon pricingClimate action is still being blocked by powerful lobbyists. Big oil has been False advertisingSince the 1970s, the public has been aware of the dangers posed by greenhouse gases. Fossil fuels enjoy large subsidies, which—inclusive of their estimated damage to health—add up to $5 TrillionOne year. China, Japan, the United States and China are the biggest financiers for new fossil fuel plant development. Multilateral development banks(MDBs), have also invested into fossil fuel projects.
The climate crisis is not self-correcting, but there are also downward spirals. For example, Ironically, energy shortages caused by global warming can lead to greater reliance on fossil fuels. Texas’Unseasonably cold weather and freezing natural gas pipelines partly caused electricity failures in 2021. WAr-triggered price increases in petroleum products can increase energy concerns and drive policy reversals.
It is a missed opportunity for economics to be absent from the policy table. The top economic journals barely make it to the top ten at the last count. PublishArticles on climate change. The most cited articles on climate change Quarterly Journal of Economicshad not published any, and the quantitative Econometrica—Only two. Only two people were awarded the Nobel Prize in Economics. Nordhaus for “integrating climate change into long-run macroeconomic analysis,” but the cited work and its follow up did not recognize exponential damages, tipping points, and irreversibility.
This error of omission is underpinned by valuation centered on GDPa gross measure that does not include environmental and Biodiversity damages. To maximize GDP growth, it is important to not allow for carbon intensity. The “East Asia miracle”Inflictually, they celebrated rapid GDP growth at the cost of ecological destruction. Rapid growth in India and China has been as rapid as in advanced economies. WorseningThe environment. Southeast AsiaDespite being the most climate-vulnerable, it has the highest rate for increasing its emissions.
Once conventional economic growth has been adjusted for CO2 A truer picture of emissions per capita emerges that can be used to guide policy. One such measure is the planetary-pressures-adjusted Human Development Index (PHDI) that was proposed by The United Nations Development Program to qualify its own human development index (HDI). Country rankings change notably in going from HDI to PHDI—for example, top-ranked Norway falls 15 places, and the U.S.—17th ranked—Drops 45 places
The World BankThe sum of the produced capital and human resources, but also the natural capital for each nation between 1995-2008 has been defined as national wealth. The United Nations Environment Program (UNEP) also estimates inclusive wealth as the “social value of natural capital, human capital and produced capital” of 135 countries’ during 1990-2014. UNEP shows a larger adjustment for environmental loss, presumably since the World Bank’s measure, according to the report, does not subtract the social cost of carbon from fossil fuels, nor include the value of carbon sequestration from conserving ecosystems.
The crucial question is whether economic measures like the World Bank’s Assessment of Institutions and Country PolicyMake adjustments for environmental losses. And whether there are any measures like the Doing Business indexYou should not rank performance based on the false premise that there is less regulation, including in the areas of social and environmental protection.
Growth analysisRightly, productivity is emphasized in addition to physical and personal capital accumulation as also worker participation. However, environmental sustainability is not taken into consideration. The World BankThe International Monetary FundThe MDBs, which have prepared reports on climate change must incorporate climate impacts into growth projections. The MDBs could play a significant role in addressing global public goods such as the environment and health of countries. They could increase lending for climate adaptation and mitigation, as some have promised to do. The World Bank has a brand new Climate Change Action Plan It aims, among others, to align operations at the International Finance Corporation with Paris Climate goals by 2025.
Mainstream economics must move in step with climate science if mainstream economics is to make a difference. Growth economics—Influential in country policy—Could integrate climate change with the environment. It is time to supplement, if not replace gross domestic product, with a measure quality growth that is net climate cost damages.