When people who benefit from maintaining the status quo argue against climate policies, they invariably use two misleading tactics: exaggerating the costs of climate policies, and ignoring their benefits—economic and otherwise. In justifying his historically irresponsible decision to withdraw America from the Paris Agreement on climate change, President Trump followed this same playbook, falsely claiming: “The cost to the economy at this time would be close to $3 trillion in lost GDP [gross domestic product].”
That statistic originated from a report by National Economic Research Associates, Inc., which explicitly notes that it “does not take into account potential benefits from avoided emissions. The study results are not a benefit-cost analysis of climate change.” As Yale economist Kenneth Gillingham noted, the report’s cost estimates are also based on one specific set of policy actions that the United States could implement to meet its Paris pledges. But there’s an infinite combination of possible climate policy responses, with some costing more than others.
For example, a revenue-neutral carbon tax is the proposed policy that currently has the most widespread support. One such proposal by the Climate Leadership Council has been endorsed by a broad coalition that includes Stephen Hawking, ExxonMobil, the Nature Conservancy, and George Shultz. And the Citizens’ Climate Lobby—a nonpartisan grassroots organization advocating for a similar policy—recently sent over 1,000 volunteers to lobby members of Congress in Washington, DC.
Regional Economic Modeling, Inc. (REMI) evaluated how the Citizens’ Climate Lobby’s proposed policy would impact the US economy. The REMI report concluded that implementing a rising price on carbon pollution and returning 100 percent of the revenue equally to American taxpayers would grow the economy and modestly increase personal disposable income, employment, and gross domestic product—the total of all goods and services produced within a nation’s borders. And the REMI report didn’t even include the financial benefits of slowing climate change and curbing its harmful economic impacts.
Those benefits are potentially massive. In terms of climate change, many of the benefits are realized in avoided costs. For example, the 2006 Stern Review on the Economics of Climate Change found that unabated climate change would cost the world 5 to 20 percent of GDP by 2100. The economic picture could be even bleaker yet—most economic modeling assumes that economic growth will continue steadily regardless of climate change, but in reality, climate impacts are likely to slow economic growth. That was the finding of two papers published in 2015 by researchers from Stanford and the University of California at Berkeley.
The second paper found that there’s a sweet spot average temperature of around 13 degrees Celsius (55 degrees Fahrenheit) at which economic productivity is highest. The United States and much of Europe currently have climates in that optimal range, but many countries near the equator—which happen to predominantly be poorer, developing countries—already have temperatures above the sweet spot. As global warming causes temperatures to rise, the climates of the United States and Europe will slip out of the economically optimal temperature range, and that same temperature rise will push those poorer countries even further into the realm of economy-crippling heat. As a result, global warming will hamper economic growth. The researchers estimated that this would amplify the costs of climate change by at least 2.5 times more than previous estimates.
Tackling global warming will certainly come with costs. Although a revenue-neutral carbon tax would benefit the economy, that one policy by itself won’t be enough to solve the problem. We would still need to invest in and deploy low-carbon technologies like renewable energy and electric vehicles. However, looking at those costs in isolation without considering their benefits, as President Trump did, paints a misleading and inaccurate picture.
For example, Citibank—America’s third-largest bank—published a report in 2015 looking at both the costs and benefits of climate action and inaction scenarios. The report found that inaction actually had higher investment costs than the action scenario—such as cost-saving investments in energy efficiency, for example. We’ll eventually have to invest in updating all of our aging energy and transportation infrastructure anyway, due to simple maintenance and wear-and-tear. And it turns out that simply keeping to the old status quo fossil fuel-based energy approach is more expensive than transitioning to a greener economy with more energy-efficient buildings, renewable energy sources whose costs are falling rapidly, and highly efficient electric cars, to name just a few examples.
On top of that, investment in clean energy delivers additional returns in avoided climate costs. The Citibank report ultimately found that taking action to address climate change could save tens of trillions of dollars. It’s a counter-intuitive reality when we hear constant claims about economy-crippling, job-killing climate policies, but it is indeed reality: Taking action to address climate change could save tens of trillions of dollars.
It’s also important to remember that money isn’t everything. Climate change comes with other costs that we can’t put a price tag on. How much do we value avoiding the human suffering resulting from famines and violent conflicts exacerbated by climate change-amplified droughts? What about biodiversity and the lives of other species? We’re currently on a path that according to the IPCC puts 40 to 70 percent of all global species at risk, and scientists have warned that we’re heading toward Earth’s sixth mass extinction event. When we consider climate change purely in terms of dollars and cents, we lose sight of the value of thriving life.
Even from a purely fiscal perspective, the case for climate policy is clear. Just consider California, whose carbon pollution has fallen as the state’s population and economy have grown. California has America’s most aggressive climate policies, including a carbon cap-and-trade system that state policymakers are considering modifying to resemble a revenue-neutral carbon fee, and all the while its economy has thrived. There’s no reason why we can’t craft smart climate policies with tremendous economic benefits that also preserve the climate of the only planet we’ve got. But we need more Republican Party leaders to seriously engage in that policy debate instead of simply denying that the problem exists, or grossly misrepresenting the costs of its solutions.