Why it’s time to prepare for the worst on climate change

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Robert Pindyck is a professor of economics and finance at the Bank of Tokyo-Mitsubishi MIT Sloan School of Management. He is the author of Climate future: Avoiding and adapting to climate change (The Oxford University Press)

We cannot predict how extensive climate change will be in the coming decades, nor can we predict its economic and social impact. But we need to be prepared for the worst and start investing in adaptation now.

We have to be realistic. First, it seems unlikely that we can partially prevent warming by 2°C or even 3°C, because we are not doing much to reduce CO2 emissions. Europe and the US have made cuts and unveiled policies to do more. But what matters is global emissions, and most other countries are doing very little.

Even optimistic projections show that global emissions will continue to increase over the next decade before declining only gradually. CO remains in the atmosphere for centuries so even with reduced emissions today, the atmospheric concentration of CO will continue to increase, pushing temperatures up.

Second, we don’t know what will happen to sea level, the frequency and intensity of hurricanes, and other measures of climate change, nor their impact on GDP loss, increased morbidity and mortality, and social disruption. We have no theory in economics, climate science or elsewhere to turn to, nor data to rely on. We have never seen the effects of such a rise in temperature on an industrial economy.

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But that uncertainty doesn’t mean we should wait to learn more before spending money on emission abatement. You don’t know if a hurricane, flood, or fire could damage your home, so you buy homeowners insurance. You don’t know if one day you will find yourself in hospital, so you need health coverage. Similarly, it makes sense to insure against a catastrophic outcome, through measures such as reducing emissions.

We have to reduce emissions, but we should do it as efficiently as possible. Efficient means at the least cost, and study after study has shown that the cheapest way to reduce emissions is to impose a carbon tax. A carbon tax simply increases the cost of burning carbon to cover the resulting environmental damage.

Ideally, an international agreement could lead to a harmonized tax that all major polluting countries would agree to impose. And, since each government would collect the tax and spend the money as it sees fit, a harmonized tax could facilitate an international deal. A carbon tax is far more efficient than subsidies for electric cars, solar panels and other similar technologies which essentially provide financial support to the wealthy.

But reducing emissions alone is not enough. Even a substantial reduction is unlikely to be sufficient to prevent a significant increase in temperature. Therefore, we need to start investing in climate change adaptation now, in order to counter its possible impact.

Examples of adaptation include developing new heat- and drought-tolerant hybrid crops, adopting policies to discourage construction in flood-prone areas, and building dams and levees to prevent flooding.

Households, private businesses and the government must all participate. For example, families can consider flood risk when choosing where to buy or build a home, classify the landscape to divert rainwater, invest in collection and drainage pumps, and install efficient air conditioning systems when possible. .

For businesses, adaptation creates numerous opportunities to invest in the development of new heat- and flood-resistant crops, the development of more efficient and cost-effective air conditioning systems, and the production of pumps and drains that households will need to protect themselves from floods.

However, the biggest investments will come from governments. A federally funded study for a seawall around southern Manhattan that would prevent flooding from storm surge such as occurred during Hurricane Sandy in 2012 showed an expected cost of about $120 billion. We need to repair and improve existing levees in many exposed areas, as has been done around New Orleans.

Governments must also invest in the ability to undertake solar geoengineering: injecting sulfur into the upper atmosphere to reduce the greenhouse effect of rising atmospheric CO. Solar geoengineering does not reduce the accumulation of CO in the atmosphere but it does reduce the warming effect of that build.

It is controversial because an increasing atmospheric concentration of CO can cause ocean acidification, which could affect fish and corals. Given these concerns, solar geoengineering would be a temporary and partial solution to the global warming problem. But, if the climate outcome proves catastrophic, it’s a solution we may have to rely on, and now is the time to prepare.

We do not know what our climate future will look like. We may get lucky and experience only moderate climate change with limited economic and social impact. But we cannot count on luck. Now is the time to do more to efficiently reduce CO2 emissions and invest in adaptation to limit the impacts of climate change.

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