1.1 Climate Change
Climate change is the biggest challenge mankind currently faces. The two hot summers of 2018 and 2019, with heat waves in Europe, made everybody experience at last what climate change might mean in the future. Global warming will affect the living conditions in many countries severely, but especially in the developing world. Apart from extreme heat, water scarcity and negative impacts on food production are among the most alarming consequences. Regional and international migration triggered by climate change will also affect richer countries, in which the direct effects of climate change might be more limited. The Swedish girl Greta Thunberg gave climate activism a face and sparked the Fridays for Future movement of young protesters, which generated much public awareness that a policy change is needed. These protests are not just mass hysteria. In the German-speaking countries, almost 27,000 scientists supported the concerns of the young protesters and declared: âthese concerns are justified and are supported by the best available science. The current measures for protecting the climate, biodiversity, and forest, marine, and soil resources, are far from sufficientâ.1 In contrast to scepticism spread by organised climate change denial (Oreskes and Conway 2010; Dunlap and McCright 2011), there is a vast scientific consensus that anthropogenic climate change2 exists. Today there is accumulating evidence that it is occurring significantly faster than expected.
In a special report published in October 2018, the IPCC estimated that the global average temperature is already approximately 1.0 °C above pre-industrial levels mainly due to human activities (IPCC 2018). In the Paris Agreement of 2015, 197 parties signed to undertake measures to keep the global temperature increase below 1.5 °C. According to the IPCC (2018), it is likely that global warming will reach 1.5 °C between 2030 and 2052, if the current rate of temperature increase is unchanged. However, new scientific evidence suggests that climate change unfolds much faster than anticipated so far. Xu et al. (2018) expect that the 1.5 °C level could be reached already in 2030, because the combined effect of rising CO2 emissions, declining air pollution and natural climate cycles has been underestimated. Cheng et al. (2019) report that the oceans warm up 40% faster than previously assumed by the IPCC. Evidence is also mounting that permafrost thaw in the Arctic happens much faster than previously predicted. As a result highly aggressive greenhouse gases such as methane and N2O are emitted at higher rates than previously thought (Schoolmeester et al. 2019; Wilkerson et al. 2019; Farquharson et al. 2019). This is one of the vicious cycles described by climate science, namely that global warming due to greenhouse gas emissions sets free further greenhouse gases so far bound in permafrost. Furthermore, large glaciers worldwide and even the ice mass in Greenland seem to melt much quicker than predicted (Bevis et al. 2019; Zemp et al. 2019). The melting of large ice masses is relevant, because it is the main reason for climate-related sea-level rise, because glaciers are significant freshwater sources in Asia and because it is another negative feedback effect due to the reduced reflection of sunlight back into space (albedo effect) which reduces warming. Despite this new evidence, emissions are still increasing and a political commitment to mitigate climate change remains out of sight. It is worth asking who the important parties are and who is responsible for the fight against climate change. Of course, households and firms are important actors, because their economic activities are the ultimate cause of greenhouse gas emissions. Governments that provide the legal framework of economic activities are economic actors themselves and therefore highly relevant, too. In this book, we ask about the role and responsibility of science and especially those of economists .
1.2 Climate Change as an Economic Problem
By now, climate change is a problem that is at least as important for economics and other social sciences as it is for the natural sciences. Climate science has established the existence of anthropogenic climate change and understands many of its physical and chemical causes. We also have a rough idea how climate change might affect ecosystems. Yet climate change is not only a huge problem for nature and the ecosystems but also for the human society and a threat to human life. From a practical perspective, climate change is more a societal problem than a scientific one. Scientifically, one might argue that the solution of how to halt global warming is quite trivial. Since the accumulation of greenhouse gases in the atmosphere is the cause of global warming, we can solve the problem by stopping the emission of those gases. However, we do not know how our societies can achieve this without crashing our social systems. Similarly, while we do have some ideas about the physical consequences of a changing climate, it is hard to assess what the economic and societal effects will be. We can be sure that there will be economic costs and welfare losses, but the size and distribution of those welfare effects are open questions.
In this book, we argue that economic science as a whole does not do enough to understand the economic causes and consequences of climate change and to make a contribution to the societal efforts to mitigate the effects of climate change. Climate change is both a societal and a scientific challenge. In our view, science and economists have several responsibilities to deal with this issue. One responsibility consists in doing research on climate change from multiple perspectives, because the complex network of causes and effects cannot be understood adequately from a single research approach. Another responsibility is to provide climate policy recommendations that have practical relevance and take the difficulties related to the implementation of effective policies into account. We derive these responsibilities from ethical considerations related to the goals of science and explain in what respect and why economists in general currently do not fulfil their responsibility. When talking about economics, we refer to the group of academic economists. Contrary to practical economists working in private companies or for public authorities, they are not expected to fight for vested interests. Since freedom entails responsibility, academic economists are the appropriate audience for our reflections.
Climate change is different from most other societal challenges that are analysed in the different academic disciplines. Its first important characteristic is the likely severity of its impact on all life on Earth. Natural scientists agree that strong increases in the average global temperature will be life-threatening for many species, including humans (IPCC 2014). To date, we may not know exactly from which temperature the world will become inhabitable for the current species, but we know that there exist critical temperature regions. There are other threats to (human) life on earth, such as nuclear warfare and accidents, pandemics or terrorism, but climate change is special because of its complexity, which is the second important characteristic.
Climate change is a complex problem, both for society and for science. It is global in scope, affects present and future generations and can only be solved by global measures. It is pervasive in the sense that it affects many natural and societal systems, which interact in non-linear ways with each other. These interactions make it extremely hard to predict and control the effects of climate change. Climate change is strongly interwoven with other problems as one of their causes, but also as an effect. Changing climatic conditions are related to how land can be used. They affect food production, the availability of fresh water and human health. Deteriorating physical living conditions in some regions cause migration and potentially local and regional conflicts. Migration and conflicts, in turn, have economic and societal implications for the countries that are directly involved, but also for other countries that are indirectly affected, for example, as transit countries or trade partners.
Climate change should be a central topic in economics, because it is an undesired side effect of economic activities, such as production, trade and consumption. The growth of these activities, which is a main topic of economic inquiry and a key goal of economic policy, will aggravate climate change under the current conditions. Economic activities are affected by the changing climate, which will damage physical and natural capital as inputs to production. Resources needed to deal with climate-related damages are not available for other uses implying a welfare loss. The effects on societiesâ resources, capital a...