The Climate Casino

The Climate Casino: Risk, Uncertainty, and Economics for a Warming World

William Nordhaus
Copyright Date: 2013
Published by: Yale University Press
Pages: 392
https://www.jstor.org/stable/j.ctt5vkrpp
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  • Book Info
    The Climate Casino
    Book Description:

    Climate change is profoundly altering our world in ways that pose major risks to human societies and natural systems. We have entered the Climate Casino and are rolling the global-warming dice, warns economist William Nordhaus. But there is still time to turn around and walk back out of the casino, and in this essential book the author explains how.

    Bringing together all the important issues surrounding the climate debate, Nordhaus describes the science, economics, and politics involved-and the steps necessary to reduce the perils of global warming. Using language accessible to any concerned citizen and taking care to present different points of view fairly, he discusses the problem from start to finish: from the beginning, where warming originates in our personal energy use, to the end, where societies employ regulations or taxes or subsidies to slow the emissions of gases responsible for climate change.

    Nordhaus offers a new analysis of why earlier policies, such as the Kyoto Protocol, failed to slow carbon dioxide emissions, how new approaches can succeed, and which policy tools will most effectively reduce emissions. In short, he clarifies a defining problem of our times and lays out the next critical steps for slowing the trajectory of global warming.

    eISBN: 978-0-300-20381-3
    Subjects: Economics, Political Science, Law

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
  3. ACKNOWLEDGMENTS
    (pp. xi-xii)
  4. NOTE TO READERS
    (pp. xiii-xiv)
  5. PART I THE GENESIS OF CLIMATE CHANGE
    • 1 FIRST ENCOUNTERS IN THE CLIMATE CASINO
      (pp. 3-11)

      If you read the newspaper, listen to the radio, or scan the daily blogs, you are virtually certain to encounter stories about global warming. Here is a sample from a variety of sources:

      The last de cade was the warmest on record.

      The most inconvenient fact is the lack of global warming for well over 10 years now.

      Polar bears could disappear within a century.

      Global warming claims are a hoax.

      The Greenland ice sheet has experienced record melting.¹

      Clearly, global warming is getting a lot of attention today. And just as clearly, people disagree about whether it is real,...

    • 2 A TALE OF TWO LAKES
      (pp. 12-16)

      Although our world is huge and seems impervious to human insults, life on earth is in fact a fragile system. It is full of organisms, linked together in a complex web of relationships, all of which are made possible by the warmth of the sun and the protection of the atmosphere. We need only look at our moon, which receives about the same amount of solar radiation each year as the earth, to recognize the contingency of our earthʹs systems. There on the moon, but for the grace of our atmosphere, would we go. Perhaps living systems have evolved elsewhere...

    • 3 THE ECONOMIC ORIGINS OF CLIMATE CHANGE
      (pp. 17-35)

      Most people think that global warming is a question for the natural sciences, that it primarily involves heat waves, melting ice sheets, droughts, and storms. True, scientific controversies have been central to public debates about global warming. However, in reality the ultimate source—and the solutions—lies in the realm of the social sciences.

      Begin by stepping back and asking a basic question. Why is global warming such a special problem? Why is it a global problem and not a national problem or a household problem? Why is it such a persistent problem?

      The economics of climate change is straightforward....

    • 4 FUTURE CLIMATE CHANGE
      (pp. 36-49)

      The first step to an understanding of the dangers of climate change is a solid grounding in climate science. Those who read only the popular press or listen to television debates might think it is the latest scientific fad—something dreamed up a few years ago by an entrepreneurial scientist. The truth is quite the opposite. The science behind CO2-induced global warming is more than a century old. It is among the major accomplishments of modern earth sciences. For those who study the subject as scientists, looking at the wealth of studies and without an eye to the politics of...

    • 5 TIPPING POINTS IN THE CLIMATE CASINO
      (pp. 50-66)

      People might wonder how concerned they should be about the temperature trends described thus far. A change of 2 or 3°C does not seem that alarming. After all, we often experience that much change in one hour in the morning. Moreover, the temperature changes envisioned are small relative to those that individuals and groups experience through migration. People today happily move from Snowbelt to Sunbelt to enjoy the warmer lifestyle. If you move from Minneapolis to Phoenix, you will be moving to a climate that is 13°C warmer.

      But this description ignores the real risks. The problem is not a...

  6. PART II IMPACTS OF CLIMATE CHANGE ON HUMAN AND OTHER LIVING SYSTEMS
    • 6 FROM CLIMATE CHANGE TO IMPACTS
      (pp. 69-77)

      Part I of this book recounted how scientists discovered that we are altering our global climate. Our daily activities—driving our cars, heating our homes, and cooking our pizzas—generate vast and long-lasting changes in the world around us. Part II maps out the impacts of those changes on human societies and natural systems.

      The focus now shifts from determining geophysical changes to anticipating their impacts on human and other living systems. This subject might seem easier than the deep physics and chemistry of climate science because it is more familiar to us, but the opposite is true. In reality,...

    • 7 THE FATE OF FARMING
      (pp. 78-90)

      We begin our review of economic impacts with farming. Of all major sectors, farming is the most sensitive to climate and is therefore most likely to feel the impacts of climate change. Most plants do not thrive in the Sahara Desert, and we would naturally want to know how much current farmland will turn to desert in a warmer world. Additionally, other impacts of climate change are connected to agriculture. Two of the major health impacts—malnourishment and diarrheal diseases, discussed in Chapter 8—are usually caused by poor diets and poverty. Some have worried about the impact of climate...

    • 8 THE IMPACT ON HUMAN HEALTH
      (pp. 91-99)

      Among the frightening impacts of global warming is the potential for major impacts on health. The concerns include malnutrition, heat stress, air pollution, and the spread of tropical diseases like malaria.¹ TheStern Reviewput forth the following somber warning: ʺJust a 1°C increase in global temperature above pre-industrial [levels] could double annual deaths from climate change to at least 300,000…. At higher temperatures, death rates will increase sharply, for example millions more people dying from malnutrition each year.ʺ²

      This all sounds extremely grave. However, as with agriculture, we need to look carefully at the assumptions underlying these projections and...

    • 9 PERILS FOR THE OCEANS
      (pp. 100-115)

      The last two chapters, on agriculture and health, involved intensively managed systems. While the impacts in those areas may be unfavorable, particularly if they are badly managed, the risks are within the range of economic shocks experienced in normal times. A complete analysis, which is beyond the scope of this book, would add other managed or manageable sectors to that list, such as national security, forests, fisheries, construction, and energy production. However, the real concerns about global warming lie elsewhere—outside economic sectors that are increasingly managed and insulated from adverse environmental conditions.

      I turn to four of these most...

    • 10 INTENSIFICATION OF HURRICANES
      (pp. 116-121)

      Nothing illustrates the Climate Casino better than the impact of warming on tropical storms. When they begin to form, we donʹt know how intense they will become, where they will hit, and how much damage they will cause. A major question is how much global warming will intensify and redistribute hurricanes over the coming decades—and how much damage these changes will cause.

      You are unlikely to see a video on the rising sea because the rise is imperceptible. In most places, tidal changes over a few hours are larger than sea-level rise over the next century. By contrast, hurricanes...

    • 11 WILDLIFE AND SPECIES LOSS
      (pp. 122-134)

      Finally, climate change has dangerous impacts on wildlife and, more generally, species and ecosystems around the world. Ecosystems have two interesting features. To begin with, they are largely unmanaged or unmanageable systems, and, second, they are economically far removed from the marketplace.

      The nonmarket aspect raises new questions for impacts analysis: How can we mea sure the ʺvalueʺ of ecosystems or of endangered species? How can we put losses in this area in a metric that can be compared to those in market sectors such as agriculture and the costs of abatement? This chapter begins with a review of the...

    • 12 ADDING UP THE DAMAGES FROM CLIMATE CHANGE
      (pp. 135-146)

      The last few chapters have taken an extensive look at the major impacts of climate change. I described this as scientific house-to-house combat because each sector has its own special dynamics and relation to climate change. Soil moisture is critical to agriculture, sea surface temperature to hurricanes, atmospheric concentrations of CO2for ocean acidification, and so on.

      But having gone house to house, we can now stand back and look at the overall picture. What are the overall impacts as best we can judge? Five overarching themes emerged from our review of impacts, and it is worth emphasizing them.

      We...

  7. PART III SLOWING CLIMATE CHANGE:: STRATEGIES AND COSTS
    • 13 DEALING WITH CLIMATE CHANGE: ADAPTATION AND GEOENGINEERING
      (pp. 149-156)

      Earlier chapters explained how uncontrolled growth in carbon dioxide emissions and other gases is leading to vast changes in our climate systems along with human and natural systems. Most changes are likely to happen gradually, like a long freight train gathering speed and momentum. We cannot predict the impacts with precision, but they are unwelcome at best and dangerous at worst. And like the accelerating freight train, they will be hard to stop once they get under way.

      The chapters in this part consider steps to deal with the threat of climate change. There are three major approaches. A first...

    • 14 SLOWING CLIMATE CHANGE BY REDUCING EMISSIONS: MITIGATION
      (pp. 157-168)

      The discussion up to now suggests that neither adaptation nor geoengineering is a satisfactory solution to the threats of global warming. The only genuine solution for the long run is to reverse the accumulation of green house gases (GHGs). This is typically called mitigation or, more accurately, prevention.

      Mitigation involves reducing the concentrations of GHG emissions. The most important GHG is CO2, produced primarily by the burning of fossil fuels. There are other long-lived GHGs, such as methane (the natural gas that heats our homes). Other GHGs are short-lived, including particulate matter (also called aerosols). Some of these tend to...

    • 15 THE COSTS OF SLOWING CLIMATE CHANGE
      (pp. 169-181)

      The previous chapter concluded that limiting climate change requires focusing primarily on reducing concentrations of CO2and other greenhouse gases (GHGs). We saw that there are four basic ways to accomplish this. The first, which is really not in contention, would reduce our living standards by slowing economic growth.

      The other three are worth serious consideration. We might change our lifestyle by curbing our carbon-intensive activities, such as deciding not to fly around the world. Additionally, we might produce our goods and ser vices with low-carbon or no-carbon technologies or fuels, such as substituting natural gas or wind for coal...

    • 16 DISCOUNTING AND THE VALUE OF TIME
      (pp. 182-194)

      Any consideration of the costs of meeting climate objectives requires confronting one of the thorniest issues in all of climate-change economics: How should we compare present and future costs and benefits? This is a moderately complex issue and extends to the frontier of current economic theory. However, it is also of central importance for understanding the temporal trade-offs involved. These are trade-offs between the costs of emissions reductions today and the societal value of reduced damages in the future. So a full appreciation of the economics of climate change cannot proceed without dealing with discounting.

      Here is the issue in...

  8. PART IV POLICIES AND INSTITUTIONS FOR SLOWING CLIMATE CHANGE
    • 17 HISTORICAL PERSPECTIVES ON CLIMATE POLICY
      (pp. 197-204)

      Earlier parts have examined different aspects of the climate-change puzzle: climate science, climate-change impacts, and the costs of abatement. We concluded that the only reliable way to avoid dangerous climate change is to reduce the concentrations of CO2and other green house gases. However, doing so is potentially costly, particularly if nations do not act in concert and use efficient control mechanisms. It is now time to put all the pieces together.

      How can governments set a sensible temperature target for climate-change policy? This involves the question of how much emissions should be reduced.

      How will policies relate to the...

    • 18 CLIMATE POLICY BY BALANCING COSTS AND BENEFITS
      (pp. 205-219)

      Chapter 17 concluded that a sensible target for climate-change policy would require balancing abatement costs and climate damages. This approach is often used by economists in analyzing different options and is called cost-benefit analysis. The basic idea is quite intuitive. In a world of limited resources, we should make investments that produce the greatest net social benefits—that is, ones that have the greatest margin of social benefits over social costs.¹

      People perform cost-benefit analysis all the time in their daily lives. Sometimes, the calculations are straightforward. A neighborhood gasoline station is convenient, but it charges 10 cents per gallon...

    • 19 THE CENTRAL ROLE OF CARBON PRICES
      (pp. 220-232)

      Climate-change policy is a tale of two sciences. The natural sciences have done an admirable job of describing the geophysical aspects of climate change. The science behind global warming is well established. While the timing and regional effects of the changes are not known with certainty, natural scientists have persuasively shown that unchecked CO2emissions will have dangerous consequences.

      But understanding the natural science of climate change is only the first step. Designing an effective strategy to control climate change will require the social sciences—the disciplines that study how nations can harness their economic and political systems to achieve...

    • 20 CLIMATE-CHANGE POLICIES AT THE NATIONAL LEVEL
      (pp. 233-243)

      Economics brings two central lessons to policies on global warming. The first, discussed in Chapter 19, is that people and firms must face economic incentives to tilt their behavior toward low-carbon activities. Activities that lead to emissions of CO2and other greenhouse gases (GHGs) must become more expensive, which primarily requires raising the prices of carbon-based fuels. This is an inconvenient economic truth because people resist paying more for energy.

      The second economic truth is that markets alone will not solve this problem. There is no genuine ʺfree-market solutionʺ to global warming. We need new national and international institutions to...

    • 21 FROM NATIONAL TO HARMONIZED INTERNATIONAL POLICIES
      (pp. 244-258)

      The last two chapters discussed how governments can harness the market to slow the pace of global warming. We saw that a key element is putting a price on CO2and other greenhouse gases (GHGs). We next explained the two potential systems that would accomplish this: cap and trade and carbon taxes. These would work at the level of individual nations and indeed have been implemented for almost a decade by the EU in its Emissions Trading Scheme.

      One final facet of an effective global warming policy is … that it be global. The present chapter discusses alternative approaches, including...

    • 22 SECOND BEST AND BEYOND
      (pp. 259-273)

      Many people who think global warming is a grave concern may agree with the proposals of the three previous chapters. They see the important role of carbon pricing; they may like cap and trade or carbon taxes or both; they recognize that a global effort is necessary for effective and efficient management of our global commons. At the same time, they might say, ʺAlas, these are utopian ideas. Scientists and economists may agree with such plans. But the people have other priorities. They are worried about their jobs, their declining incomes, and their health care. Americans are not ready for...

    • 23 NEW TECHNOLOGIES FOR A LOW-CARBON ECONOMY
      (pp. 274-290)

      Earlier chapters have described economic policies that provide incentives for firms and individuals to make the transition to a low-carbon economy. The discussion has described only in a general fashion the exact technologies that will power that transition. But we donʹt drive or heat our homes on generalizations. We use actual energy in the form of jet fuel for our airplanes, electricity for our computers, and gasoline for our cars. How big a challenge is it to ʺdecarbonizeʺ our economy?

      A second question is the technological one. Todayʹs economy is driven largely by fossil fuels like oil and coal. What...

  9. PART V CLIMATE POLITICS
    • 24 CLIMATE SCIENCE AND ITS CRITICS
      (pp. 293-302)

      If this were an academic treatise on the best economic strategy to deal with climate change, we would now be finished. We have reviewed the science, economics, and policies. We have concluded that climate change is serious and have laid out some of the options for governments to deal with it. End of story.

      In reality, the story continues. This book takes climate science seriously. But there are skeptics. Many people misunderstand the issues. Doubts about the validity of mainstream climate science as well as policies to slow warming are central issues in American politics today. Here are some examples...

    • 25 PUBLIC OPINION ON CLIMATE CHANGE
      (pp. 303-315)

      In a democracy, effective and durable policies to slow global warming must ultimately rest on public support. While the scientific basis has become stronger over time, we observe a large and growing divide between climate scientists and popular opinion in the United States. What are popular views on climate change? What are the reasons for the growing gap in public understanding? These are the questions I examine in this chapter.

      Before analyzing public opinion on global warming, let us step back to examine public opinion on science. Climate change is a scientific field. It will be instructive to look at...

    • 26 OBSTACLES TO CLIMATE-CHANGE POLICIES
      (pp. 316-326)

      The science and economics of global warming are clear. Unless forceful measures are taken, the planet will continue to warm. The result will be increasingly severe damage to the natural world and to vulnerable parts of human systems. Policies to slow climate change are economically simple if politically difficult. They involve raising the price of CO2and other greenhouse gases and harmonizing the price across countries.

      How much progress have we made in implementing an effective policy? If we use carbon prices as a metric, very little. I suggested that a price of $25 per ton of CO2would be...

  10. NOTES
    (pp. 327-364)
  11. INDEX
    (pp. 365-378)