The Problem With Putting a Price on the End of the World
https://www.nytimes.com/interactive/2019/04/09/magazine/climate-change-politics-economics.html
Source: By David Leonhardt, The New York Times.
Excerpt: On a Saturday afternoon in early December, inside a soaring auditorium on the campus of Stockholm University, William Nordhaus gave the crowning lecture of his half-century career as an economist. The occasion was his acceptance of the Nobel Prize in economics, .... The title of the lecture was “Climate Change: The Ultimate Challenge for Economics.” ...The Nobel was a tribute to the originality and influence of his work developing economic models that help people think about how to slow climate change. ...Climate change is a threat like no other. Fatal heat waves, droughts, wildfires and severe hurricanes are all becoming more common, and they are almost certain to accelerate. Avoiding horrific damage, as a United Nations panel of scientists recently concluded, will require changes in human behavior that have “no documented historic precedent.” In his speech, Nordhaus explained that people use too much dirty energy because they don’t have to pay the true costs it imposes on the world: pollution-related health problems in the short term and climate change in the long term. Economists refer to these costs as externalities, because they are not naturally part of the market system. “We have a climate problem,” Nordhaus said, “because markets fail, and fail badly, in the energy sector.” The only solution, he argued, was for governments to raise the price of emissions. Economists and other policy experts have long focused on this idea of carbon pricing. ...But if the idea’s straightforwardness is its great economic advantage, it has also proved to be its political flaw. ...across the industrialized world, the middle class and the poor have been struggling with slow income growth. As Nordhaus acknowledged in his speech, curbing dirty energy by raising its price “may be good for nature, but it’s not actually all that attractive to voters to reduce their income.”....
Source: By David Leonhardt, The New York Times.
Excerpt: On a Saturday afternoon in early December, inside a soaring auditorium on the campus of Stockholm University, William Nordhaus gave the crowning lecture of his half-century career as an economist. The occasion was his acceptance of the Nobel Prize in economics, .... The title of the lecture was “Climate Change: The Ultimate Challenge for Economics.” ...The Nobel was a tribute to the originality and influence of his work developing economic models that help people think about how to slow climate change. ...Climate change is a threat like no other. Fatal heat waves, droughts, wildfires and severe hurricanes are all becoming more common, and they are almost certain to accelerate. Avoiding horrific damage, as a United Nations panel of scientists recently concluded, will require changes in human behavior that have “no documented historic precedent.” In his speech, Nordhaus explained that people use too much dirty energy because they don’t have to pay the true costs it imposes on the world: pollution-related health problems in the short term and climate change in the long term. Economists refer to these costs as externalities, because they are not naturally part of the market system. “We have a climate problem,” Nordhaus said, “because markets fail, and fail badly, in the energy sector.” The only solution, he argued, was for governments to raise the price of emissions. Economists and other policy experts have long focused on this idea of carbon pricing. ...But if the idea’s straightforwardness is its great economic advantage, it has also proved to be its political flaw. ...across the industrialized world, the middle class and the poor have been struggling with slow income growth. As Nordhaus acknowledged in his speech, curbing dirty energy by raising its price “may be good for nature, but it’s not actually all that attractive to voters to reduce their income.”....