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The Economic Implications of Climate Change

Despite the existence of different opinions, the “consensus” by 97.4% of published scientists, according to Econbrowser, is that anthropogenic climate change is happening. With increased cases of extreme weather, economists and policy-makers are reconsidering the economic costs of these events, which spark another round of debates on the topic of policy change. A graph below shows the estimated cost of weather-related power outage, but chances are it’s not the only cost.

In contrast, Representative Marsha Blackburn asserts that there is still ambiguity around the question if the extreme weathers are caused by human factors. She argues that even they are, the benefits of carbon, like increasing agricultural output, should not be ignored. She also emphasizes the importance of cost-benefit analysis; however, I wonder how many politicians like her have scrutinized the various studies out there themselves. Cost-benefit analysis is no doubt needed, but since the study is largely based on forecasts, sensitivity analysis is an indispensable part in the policy-making process. And I would argue it’d be better to overestimate the costs and underestimate the benefits, as no one can really tell the future.

Humans tend to be shortsighted and weigh more on the closest problems. In a recent poll, unemployment took the second place in Top Policy Priorities in 2014 while global warming ranked 19th. Not to argue that unemployment is not an urgent issue, it is important to remember that dealing with climate change is a longtime effort and that policy-makers need to constantly consider questions like:

  • What are the economic costs of global warming, no matter it is anthropogenic or not?
  • What policy tools are there to minimize the economic impacts of extreme weathers?
  • How effective and costly are the different policies?


Sources: Econbrowser, NBC


  1. gjeong gjeong

    I think the most important policy or the agreement is reducing greenhouse emissions. Do you all remember the Kyoto Protocol? The United States, which is ranked as number 2~3 for highest amount of greenhouse gas emissions in the world, did not ratify the protocol. Look at:
    Is there anyway to come up with a consensus between developed and developing countries (esp. China)?

  2. maxstadts14 maxstadts14

    The trouble with climate change is that climate and the environment are treated as public goods; non-excludable and non-rivalrous. Unfortunately we are discovering that individual use does eventually exclude others. Like any public good, its hard to convince everyone that they should be accountable for its longevity. It looks like despite the Kyoto Protocol and other international meetings and rules about the environment they try to set, ultimately countries also act like individuals and have a hard time seriously taking responsibility towards any collective and long term good.

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