Climate change pact good for economy

Gary W. Yohe | The Hartford Courant

With more than 190 countries reaching a historic global deal on climate change at the United Nations conference in Paris Saturday, detractors repeated old, disproven arguments. As they've done for decades, critics suggest that efforts to protect the environment will hurt the economy, an argument that could not be further from the truth.

The evidence in the peer-reviewed economic literature, as well as real experience around the world and in the United States, shows that climate action not only protects public health by reducing pollution, but also protects the economy from extreme weather shocks and other complications that have and will arise from a changing climate. The sooner we act, the more money we save.

Unfortunately, mitigation, adaptation or suffering are our only options. More mitigation means less adaptation; less or no mitigation means more adaptation. But eventually the capacity for adapting will be overwhelmed in either case. These facts have been confirmed by global and national assessments for at least 20 years, but there is more. Doing nothing, as those pushing inaction propose, means having to react more quickly at far greater cost in the future.

Economists widely agree that reducing carbon emissions is most efficiently accomplished by placing a price on them. The price should start small, but rise over time to send a steady signal to businesses. If the price of carbon is clear, businesses can plan and make smart decisions to usher in the clean energy economy required to avoid climate calamity.

Economists know that exhaustible resources become more valuable over time. In this case, the resource is the atmosphere, and its ability to absorb carbon dioxide. The more we emit, the less the atmosphere can take before triggering changes that are devastating and irreversible.

But what price should be imposed? One approach is to calculate the value of damages of emissions to public health and the environment. Current estimates, here, range from below $10 per ton of CO2 to more than $300 per ton _ an uncomfortably wide range. Though critics say this range is evidence of scientific or economic uncertainty, the reality is that the prices vary depending on non-scientific value judgments. Larger or smaller prices are determined by how big a risk is deemed allowable, what level of inequality between rich and poor nations is acceptable and how we value a future dollar compared to its present value.

The bottom line, however, is that burning fossil fuels incurs costs that aren't represented by the estimated costs of what economists call an externality. When you buy a gallon of gas, you're paying the cost of digging it up, refining it and delivering it to your car. What you aren't paying is the cost of the pollution generated by its burning. That waste is carbon dioxide, and its disposal into the atmosphere creates costs that all of society pays over long periods.

This insight means that investing in clean energy not only provides new jobs (with more people employed in solar and wind rather than the coal industry), but also reduces the burden on taxpayers, who are increasingly forced to pay for extreme weather's adverse effects.

So while advocates of delaying action claim to act on behalf of the economy, economists disagree. As does the business community. That's why more than 80 U.S. corporations (as of October 2015, but growing since) have committed to significant emissions reductions over the next 15 years. Some even targeted zero global emissions for their corporations before 2030. Most are extending their efforts beyond their production processes and their supply chain vulnerabilities. Why are they doing this? Because they recognize a significant risk to their bottom line, and so their shareholders demand action.

The science is clear -- burning fossil fuels causes warming. The economics are straightforward -- fossil fuels are costly to society. The business case is compelling, and adopting clean energy futures is profitable for American business.

In that light, the final agreement in Paris is a good deal that will ensure a solid return on clean energy investments.

Denial of the problem or refusing to take action now will put human beings, our communities and our planet at risk.

Gary W. Yohe is the Huffington Foundation Professor of Economics and Environmental Studies at Wesleyan University.