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Economic thinking can act as an excuse to be really stupid

Was adapting to climate change ever really a choice?

As a budding economist learning Economics 101 at university I remember reading the words of an influential economist discussing climate change. The argument ran something like this:

  • Individuals all have choice.

  • Adapting to climate change is a choice.

  • We need to evaluate the costs and benefits of that choice and let people decide for themselves.

  • Global warming and its consequences are simply the cost of a choice to not be sustainable, and live our lives the way we want to.

The notion that the consequences of climate change are just the cost of living our lives as if nothing needs to change seems flippant today. Who can really put a cost on rising sea levels and parts of the world becoming uninhabitable? As if the cost of speeding is the $150 fine one might incur.

At the time, I remember thinking the argument above had merit. To some extent, it is true that the costs of adapting to climate change need to be balanced against the potential economic benefits of doing nothing. For example, catching public transport reduces emissions, but driving is more convenient. Surely this needs to be considered?

There is a 'me' in team, but definitely not a 'you'

It is easy to understand the attractiveness of this type of thinking above. But it can lead to a dangerous form of denial. An excuse to not change behaviour. That same reasoning can masquerade as justification for being bloody-minded in the face of common sense. As if any requirement to change behaviour is invalid if it costs too much.

Left to their own devices, people and businesses are pretty selfish when evaluating the costs and benefits of issues like climate change. That's the incentive. It's a tragedy of the commons scenario - with shared resources people and businesses often ignore the wellbeing of society for their own benefit. The social cost of individuals ignoring climate change may seem small in isolation, but planet-wide they are significant.

Climate inaction is stupid. We are playing with fire, and think we will be ok, but risk burning down the only home we have. It's not hard to catch public transport, reduce meat consumption and fly less to support sustainability. Arguing that doing these types of things is too difficult is petty in the face of an existential crisis.

However, personal costs felt today loom much larger than the costs to future generations, or costs that might be felt in faraway parts of the world. Do we really need to care about what climate change is doing in the Pacific Islands? Short answer yes. Climate change is a global crisis, even if it's not on your doorstep yet.

Inability to implement climate change initiatives quickly has made climate change worse

Balanced against the cost of change is the cost of doing nothing. The cost of doing nothing can be astronomical. Climate change highlights this more than anything.

In a risk-averse world, people are often more worried about getting it wrong than continuing on the current pathway, even if doing so is much worse. That can lead to excessive, time-sucking analysis and deliberation as decision-makers try to build the model that will solve all their problems. Often that's impossible. There isn't really a substitute for good judgement.

Throughout the history of climate change, there have been big debates and questions without clear answers. Whose fault is it? They should pay! How should we apportion costs? Who should have to change their behaviour?

These questions are important, but debating them while action stalled has made the situation so much worse. Nowadays it's questionable if Earth will remain below the 2° C temperature rise deemed safe in the Paris Agreement. More dramatic and expensive change is required today than if countries started to make more moderate changes earlier...and it'll get worse the more we delay.

Oh yea, and Swiss Re recently estimated that the cost of climate change could be around $23 trillion by 2050. Or about 11%-14% of the global economy. This expands to 18% under a do-nothing scenario. That's huge, and the do-nothing is actually worse. If you extend the time horizon beyond 2050 the picture probably gets even uglier.

When deciding how to adapt to climate change, we are just deciding 'how much' of the consequences will be passed to the future

This article is no doubt written far too late. It's a reflection on what I was reading over a decade ago. Climate change is not really 'future Earth's' problem anymore. It's now.

It is unhelpful to think that adapting to climate change is a choice, and that the consequences of doing nothing are just the cost of living our lives the way we want to. Adapting to climate change isn't really much of a choice. We will have to adapt whether we like it or not. It is that type of problem.

The choices are around how painful the adaption will be, and the extent to which future generations will suffer more because of previous decisions.

Future generations are the biggest missing stakeholder in climate change decisions. People and political parties make a big deal about how the national debt must ultimately be repaid by future generations of taxpayers. Climate change is similar. The actions we take have a huge impact on the consequences of climate change for the future. We actually need to do more today to address the previous inaction.


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