The Price of Change

One of several unfortunate elements of the global warming debate is that it's my sense that the public generally overestimates the degree of sacrifice involved in heading off catastrophic climate change. For a corrective, Ezra Klein quotes this piece by Bill McKibben:

the IPCC team made it clear in their May report that it was not only feasible to make these changes but economically possible as well. They calculated that if we made this energy transition, the economy would grow very slightly more slowly than before -- about 0.12 percent more slowly annually, or 3 percent total by 2030. In other words, our children would have to wait until Thanksgiving 2030 to be as rich as they would otherwise have been on New Year's Day of that year.

The trouble is that people generally underestimate the power of economic growth. They look around and see things that use energy -- their car, heating their house, factories where things are manufactured -- and then imagine a world very like the world of today except missing some of that stuff. That, they think, represents the economic cost of pricing carbon adequately to reduce carbon emissions in time to head off catastrophic climate change. In fact, the cost to economic growth comes not in the form of reduced output but a reduced rate of growth. The people of 2030 will still be richer than the people of 2007, and the people of 2050 will be richer still.

The only prospect for people actually becoming poorer -- as opposed to growing richer somewhat less rapidly -- is for some kind of disaster to strike. These things do happen to countries and happen all-too-frequently. They don't, however, happen as a result of increased energy taxes. They might occur, however, under some of the worst case climate change outcomes. More plausibly, unchecked climate change would have a negative impact on growth anyway (even if the changes prove mild enough to adapt to, the costs of adapting -- relocating tons of people, infrastructure, agricultural activity, etc. -- would be high) so it's by no means clear that there's an economic tradeoff here at all. But even if there is, the tradeoff isn't a question of building a less prosperous tomorrow -- a world like today, except with somewhat less -- it's a question of building a tomorrow that, while more environmentally sound, is a bit less additionally rich than it otherwise might have been.