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Dec. 10, 2019, 9:16 a.m. EST

We don’t need to abandon economic growth to solve climate change

Living standards can improve as we move to a carbon-free world

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By Joseph E. Stiglitz


SIA KAMBOU/AFP via Getty Images
Without economic growth, billions of people will remain without inadequate food, housing, clothing, education, and medical care. But there is no reason we cannot have strong economic growth and reduce carbon emissions at the same time. In fact, we must.

NEW YORK ( Project Syndicate ) — It’s clear: we are living beyond our planet’s limits. Unless we change something, the consequences will be dire. Should that something be our focus on economic growth?

Climate change represents the most salient risk we face, and we are already getting a glimpse of the costs. And in “we,” I include Americans. The United States, where a major political party is dominated by climate-change deniers, is the highest per capita emitter of greenhouse gases and the only country refusing to adhere to the 2015 Paris climate agreement.

There is ample room to change the quality of growth, to reduce its environmental impact significantly. For example, even without major technological advances, we can achieve carbon neutrality by 2050.

So there is a certain irony in the fact that the U.S. has also become one of the countries with the highest levels of property damage associated with extreme weather events such as floods, fires, hurricanes, droughts, and bitter cold.

Pollyanna

At one time, some Americans even hoped that climate change might benefit them.

Maine’s coastal waters, for example, would become swimmable. Even today, a few economists still believe that there is not much to worry about, so long as we limit the increase in average global temperature to 3 or 4 degrees Celsius, compared to the 2ºC limit set by the Paris agreement.

This is a foolish gamble. Greenhouse-gas concentrations are projected to be at their highest level in millions of years, and we have nowhere else to go if we lose.

Studies suggesting that we could tolerate higher temperatures are deeply flawed. For example, because appropriate risk analyses are systematically omitted, their models do not give sufficient weight to the probability of “bad outcomes.”

The greater the weight we assign to the risk of bad outcomes, and the worse those outcomes are, the more precautions we should take. By assigning little weight — far too little weight — to very adverse outcomes, these studies systematically bias the analysis against doing anything.

Resilient, but only to a point

Moreover, these studies underestimate the non-linearities in the damage functions. In other words, our economic and ecological systems may be resilient to small changes in temperature, with damage increasing only proportionally to temperature, but once climate change reaches a certain threshold, the increase in damages accelerates relative to the rise in temperature.

For example, crop loss becomes serious as a result of frosts and droughts. Whereas a below-threshold level of climate change may not affect the risk of frost or drought, a higher level increases disproportionately the risk of these extreme events.

It is precisely when the consequences of climate change are large that we are least able to absorb the costs.

There’s no insurance fund to draw upon if we need investments to respond to large increases in sea levels, unforeseen health risks, and migration on a massive scale as a result of climate change. The fact is that in these circumstances, our world will be poorer, and less able to absorb these losses.

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