The Costs of Climate Inaction

Matt Zeitlin remarks that “while this may be outside the purview of the Congressional Budget Office, it would be nice if they could score — somehow or another — the economic benefits of the world not melting down.”

I think the main issue here isn’t so much that it isn’t possible to develop such a metric, as that a dollars and cents approach to the costs of letting the world burn tends not to capture what’s going on. For example, even a very optimistic take on the consequences of climate change is going to say that things will look very bleak for Bangadesh. But Bangladesh is a poor country. Consequently, the economic costs of Bangladesh’s 161 million people all dying tomorrow would be relatively modest—their whole GDP is only about $225 billion. The cost to Americans of Bangladesh being wiped off the face of the earth would be tiny. But that doesn’t mean it’s okay for Americans to be blithely unconcerned about activity that threatens the lives of hundreds of millions of people in the developing world.

Second, probabilities:

The impact of a 10 degree or more warming of the globe is simply not very well-understood. The climate science along is hard to model. It’s possible that it will set into motion feedback loops that rapidly spiral out of control. The geopolitical implications are also difficult to get a grasp on. But from a strictly selfish American-centric point of view, a lot of the correctly weighted costs of climate change come from the 5-10 percent chance that things will be much worse than expected rather than from the costs arising under the most likely scenario. More modeling of the price of inaction is still worth doing, I think, but it’s critical to keep in mind that the dominant issues have to do with the risks of utter catastrophe and with the consequences to relatively poor people—neither of which are well-captured by a simple account of the likely economic cost of inaction.