Climate change is not a game… or is it?

“We deserve a safe future. And we demand a safe future. Is that really too much to ask?”. The words of the 16 year old climate change activist and The Times’ person of the year 2019, Greta Thunberg, ring true all the way into the new decade. And the answer seems straightforward: no, it is not too much to ask.

In the 1990’s scientists determined a definite link between humanity’s considerable greenhouse gas emissions and the disproportionate heating of the planet. Thus, this year marks three decades of awareness of the world-wide issue. However, according to the National Oceanic and Atmospheric Administration (NOAA), rather than getting better, the problem is only getting worse.

SotC2017_07_AtmosphericCO2_lp_graph_largeGlobal atmospheric carbon dioxide sets new record high in 2017.

Nonetheless, this negative trend can be explained, as to some people, such as the current US president – Donald J. Trump, the mountain of scientific evidence is not enough. Not even the zeal of the younger generations visible through, among other things, the popularity of the Fridays for Future movement do not seem to be enough to trigger action. In November 2019, the president actually put the United States one step behind by pulling out of the Paris Accord, which is an agreement between nations that, among other things, sets goals for carbon emission reduction.

Nevertheless, it might be the relatively slow pace of the impact of climate change that keep people skeptical. In order to inspire change in behavior there must exist a motivating factor. The fact that global warming will jeopardize the lives of future generations, although proven to be true, is simply not immediate enough; it is too much of a long term effect.

This is where an economic approach towards the issue could be more suitable than a strictly scientific study of the existing data. Although it might initially seem strange to let the people who promote profit maximization of businesses and nations be in charge of sacrificing short term monetary rewards for the prevention of a phenomenon that will only have real impacts when the current generation is already dead. Nevertheless, it makes sense for economists to work on real-life applications of solutions to climate change as the art of changing tendencies of large groups of people, be it companies or whole countries, is part of their education. They are best suited to find the necessary motivating factor for society to follow a climate change prevention plan.

Avinash Dixit, Professor of Economics at Princeton University and WES2020 speaker who specializes in game theory, has promoted the idea of graduated punishment as a more effective tool to alter habits. Rather than beginning “with the maximal credible punishment”, Professor Dixit advocates the progressive augmentation of the penalty to inspire a change in behavior. However, when asked about the application of graduated punishment to the issue of climate change, he said “that’s an extremely difficult one, partly because so many parties are involved.”

Nevertheless, in 2018, a group of economists, among them Professor Dixit, undertook the difficult task of finding an answer to the question: How to address climate change? The Princeton University Professor came to the conclusion that “the best way to move forward is to cut carbon emissions substantially, at least to the Paris Accord level,” which would be enough to keep the global average rise in temperature below 2ºC, in his opinion “the best instrument” to achieve said goal is a carbon tax.

And this is where the carrot and stick method can motivate action. On the one hand, the graduated punishment of a carbon tax on an international scale will keep companies in check as the more they disobey the more they will have to pay. On the other hand, there are economic benefits to the tax: “The revenues from a carbon tax will allow other taxes to be reduced or other socially useful expenditures to be increased.” And the estimated savings are significant enough to keep governments in favor of a high and therefore more effective tax. According to the London School of Economics “Estimates suggest that the cost savings from an economically efficient policy intervention could be as high $1 trillion a year globally.”

Thus, Professor Avinash Dixit, together with other fellow economists presented the world with an economic and, some might argue, more relatable motivating factor to act against climate change.

If the future of our children and our children’s children is not enough to convince society then maybe money will do the trick.

Written by Alexandra Keller

 

Interested to hear more from Professor Dixit himself?

Be sure to attend the Warwick Economics Summit 2020! Stay tuned for the ticket release January 13th!

 

Bibliography:

  • Featured image

Global Climate Strike in New York City Sept. 20. (CNS/Gregory A. Shemitz)

  • National Catholic Reporter

https://www.ncronline.org/news/earthbeat/catholics-call-trumps-move-paris-climate-deal-unconscionable

  • BBC

https://www.bbc.co.uk/newsround/49812183

  • NOAA

https://www.climate.gov/news-features/featured-images/2017-state-climate-atmospheric-carbon-dioxide

  • CNN

https://edition.cnn.com/2019/12/09/politics/cop25-trump-climate-change-accelerating-america-pledge-report/index.html

  • Inverse

https://www.inverse.com/article/49318-economists-modeled-the-most-plausible-paths-to-addressing-climate-change

  • Europa

https://ec.europa.eu/clima/policies/international/negotiations/paris_en

  • The Politic

https://thepolitic.org/an-interview-with-avinash-dixit-professor-of-economics-emeritus-at-princeton-university/

  • LSE

http://www.lse.ac.uk/Research/research-impact-case-studies/an-economic-solution-to-climate-change-that-could-save-trillions

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