"The age of climate panic is here," declared David Wallace-Wells, author of The Uninhabitable Earth: Life After Warming (Tim Duggan Books), in a February 2019 New York Times op-ed. He's certainly right about the panic. University of Cumbria Professor of Sustainability Leadership Jem Bendell predicts that man-made climate change will result in a "collapse in society" in about 10 years. Novelist Jonathan Franzen has warned that it will soon produce "massive crop failures, apocalyptic fires, imploding economies, epic flooding, hundreds of millions of refugees fleeing regions made uninhabitable by extreme heat or permanent drought."

Are they right?

My first article in Reason related to global warming appeared in 1992. It was a report on the Earth Summit in Rio de Janeiro, where the United Nations Framework Convention on Climate Change was negotiated. By signing the treaty, I noted, the "United States is officially buying into the notion that 'global warming' is a serious environmental problem" even as "more and more scientific evidence accumulates showing that the threat of global warming is overblown."

But in subsequent decades, as I continued to cover the science and policy of global warming, I began slowly—too slowly for some—to change my mind. In 2006, I wrote that "I now believe that balance of evidence shows that global warming could well be a significant problem."

I have spent the last several months revisiting the question, trying to figure out if the current level of "climate panic" is scientifically justified. The earth is indeed warming. Climate researchers uncontroversially agree that the average global surface temperature has increased by about 1 degree Celsius since the 19th century. About half of that increase has occurred during the last 30 years. As the planet has warmed, mountain glaciers around the world have been shrinking, Arctic sea ice has been declining, rainstorms have become somewhat fiercer, the area affected by extreme droughts has been expanding, the amount of heat being absorbed by the world's oceans has been increasing, and the global sea level has been rising.

Past those points of scientific consensus, intense disputes begin straightaway. Researchers disagree about how much of the warming can be attributed to increases in the concentration of greenhouse gases in the atmosphere. They clash over which temperature records are more accurate with respect to how fast the earth is warming. They debate whether or not the sea level is rising at an accelerated rate that threatens to inundate many of the world's biggest cities. And they argue about whether the predictions generated by complicated climate computer models can be trusted enough to guide policy.

I have unhappily concluded, based on the balance of the evidence, that climate change is proceeding faster and is worse than I had earlier judged it to be. There are still big scientific uncertainties, such as just how sensitive the global climate is to a given increase in atmospheric greenhouse gas concentrations. And the proper public policy remains far from clear. Still, most of the evidence points toward a significantly warmer world by the end of the century—probably more than 2 degrees Celsius above the preindustrial level. Such a temperature increase will definitely have substantial impacts on human beings. (For a more detailed review of current climate science, visit reason.com/climatedata.)

A Global Commons Problem

Man-made climate change is a global open-access commons problem. Since no one owns the atmosphere, no one has the incentive to expend effort protecting it from plundering. The "tragedy of the commons" occurs because every individual has an incentive to use the unowned resource before someone else does. The result is overconsumption, underinvestment, and ultimately depletion of the resource. This is happening around the world as many fisheries are declining, tropical forests shrinking, water shortages spreading, and rivers and airsheds growing more polluted. In this case, the resource being depleted is a (more or less) stable global climate.

It's time for market-oriented folks to recognize these facts and figure out the best way to handle them. If we don't offer solutions to the public, the only ones on the table will be those proposed by people who misunderstand economic principles or are unfriendly to market capitalism.

In an October Yale Climate Connections podcast, the Case Western Reserve University law professor (and Volokh Conspiracy blogger) Jonathan Adler explained it well. "A lot of the expected and predictable consequences of climate change are things that we recognize to be violations of property rights and have recognized as violations of property rights for centuries," he said. "If we accept that climate change is a problem, [and] if we accept that it's causing the sorts of rights violations that libertarians normally think justify government intervention, that should shift our discussion from whether there's a case for government intervention to what type of intervention and how do we maximize the likelihood that that intervention produces the sorts of results that we're trying to get."

There are three ways to handle overexploitation in an open-access commons: privatize it, regulate it, or ignore it. All of those choices are inherently political decisions. "The science" does not tell us what must be done.

Most economists generally think of climate change resulting from the emission of greenhouse gases as a "negative externality." These occur when production and/or consumption of a good or service imposes uncompensated costs on third parties.

Nobelist Ronald Coase showed years ago that when there are well-defined property rights and minimal transaction costs, the party creating an externality and the party affected by the externality can negotiate with each other to bring about the socially optimal market quantity—in this case, a mutually agreeable level of emissions that takes into consideration the environmental harm being done without stopping economic growth and development. In addition, Coase found, it does not matter who holds the property rights, as long as someone does.

In the case of carbon dioxide emissions, the lack of assigned property rights in the atmosphere forestalls the sort of market transactions that balance costs with benefits. The price an individual pays for electricity for his home or gasoline for his car includes the monetary costs to extract, refine, and transport those fossil fuels—but it does not include the environmental costs of burning them. In a functioning market, users are obliged to internalize (i.e., pay for) the environmental costs they impose on others.

Option 1: Privatize It

Europe's Emissions Trading Scheme (ETS) represents a kind of atmospheric privatization effort. Under the ETS, private companies are allocated tradable permits authorizing them to emit a ton of carbon dioxide for each allowance. Companies that can be productive while emitting less carbon sell their extra permits to other firms that find it more costly to make emissions cuts.

The aim of the ETS is to reduce carbon dioxide emissions, so the number of permits declines over time. Recent research suggests, however, that the ETS has so far been only modestly effective at encouraging emissions reductions. It seems European political authorities allocated so many permits that prices have remained too low to prompt much cutting by emitters.

Another way to try to put a price on the external costs of carbon dioxide emissions is to impose a carbon tax. In January 2019, nearly 3,600 economists endorsed the "Economists' Statement on Carbon Dividends," which explicitly supported such a plan.

"A carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future," the group declared. It "will encourage technological innovation and large-scale infrastructure development" while accelerating the spread "of carbon-efficient goods and services."

A huge plus for a carbon tax is that it would replace the current host of onerous and more costly top-down regulations and subsidies aimed at reducing emissions. Moreover, the revenue from the tax could "be returned directly to U.S. citizens," the economists wrote, "through equal lump-sum rebates. The majority of American families would benefit by receiving more in 'carbon dividends' than they pay in increased energy prices."

Under the carbon dividend proposal, the tax would increase predictably over time. But economist Robert Litterman, the former head of risk management at Goldman Sachs, argues that the possibility of very unhappy surprises occurring as climate change proceeds over the course of the century constitutes an "undiversifiable risk" that should command a high risk premium. Consequently, Litterman's analysis suggests that an initially high (but revenue-neutral) carbon tax that declines as climate uncertainties are resolved would a better way to mitigate climate risk.

Option 2: Regulate It

In February 2019, Rep. Alexandria Ocasio-Cortez (D–N.Y.) introduced a resolution urging Congress to adopt the Green New Deal (GND), a sweeping plan to totally remake the American economy to address the climate crisis. The GND sets the goal of "meeting 100 percent of the power demand in the United States through clean, renewable, and zero-emission energy sources" by 2030.

Three of the leading Democratic candidates for president—Sens. Bernie Sanders (I–Vt.), Elizabeth Warren (D–Mass.), and Kamala Harris (D–Calif.)—have endorsed the GND resolution, and each has proposed spending trillions of dollars over the next 10 years to implement comprehensive proposals addressing the problem of climate change. These include such steps as "dramatically expanding and upgrading renewable power sources," building "'smart' power grids," overhauling the U.S. transportation system by subsidizing electric-powered vehicles and public transit systems, and "upgrading all existing buildings in the United States and building new buildings to achieve maximum energy efficiency."

One obvious problem with the GND is its assertion, without evidence, that tackling climate change requires, among other things, guaranteeing every American a job with a family-sustaining wage, adequate family and medical leave, paid vacations, retirement security, and the right to unionize, plus access to high-quality health care and affordable housing. But the effectiveness of even the climate-related aspects of the GND is dubious. For example, in a 2017 study, Swiss researchers calculated that a carbon tax rebated to taxpayers would cut the same amount of carbon dioxide emissions at about one-fifth the cost of the sort of top-down, command-and-control regulations and subsidies envisaged by the GND.

A more defensible suggestion would involve government support for new technologies that reduce emissions. "The paramount goal of climate policy should be to make the unsubsidized cost of clean energy cheaper than fossil fuels so that all countries deploy clean energy because it makes economic sense," the Information Technology and Innovation Foundation argued in a 2014 report. Instead of rushing to deploy current expensive and inefficient low-carbon energy production methods, the ITIF researchers recommended that governments spend $70 billion annually on research and development seeking technological breakthroughs aimed at achieving dramatic cost reductions for nuclear power, carbon capture, fuel cells, smart grid technologies, electric vehicles, solar photovoltaics, wind power, and other forms of energy efficiency.

A downside of such a tech-push strategy is that energy breakthroughs are often unpredictable and governments don't have a great track record of seeing into the future. They also may not materialize fast enough to ameliorate the problems caused by climate change.

Option 3: Ignore It

The basic premise of most climate agreements is that to prevent temperatures from increasing to possibly dangerous levels, all the countries of the world would have to agree to—and then abide by—a plan to dramatically cut their emissions. But this is probably both politically and economically unachievable. According to the nonprofit Climate Analytics group, if all countries meet all of their current pledges under the Paris Agreement on Climate Change, the average global temperature in the year 2100 would still increase by 3 degrees Celsius.

In October 2018, the Intergovernmental Panel on Climate Change (IPCC) issued Global Warming of 1.5 °C, a document that has come to be known as the Doomsday Report. It found that the world would have to cut its carbon dioxide emissions by 40 to 50 percent by 2030 and entirely eliminate such emissions by 2050 in order to keep the global average temperature from rising above 1.5 degrees Celsius by 2100.

What would be gained by making such steep immediate cuts in emissions? Citing the results of integrated assessment models that combine climate and econometric data, the report noted, "Under the no-policy baseline scenario, temperature rises by 3.66°C by 2100, resulting in a global gross domestic product (GDP) loss of 2.6%." Meanwhile, under a 1.5 degree scenario, GDP would be reduced by 0.3 percent, and under a 2 degree scenario it would be reduced by 0.5 percent.

Different models come up with different estimates, and the IPCC noted that 3.66 degrees of warming could possibly reduce global GDP by anywhere from 0.5 percent to 8.2 percent. In other words, if humanity does nothing whatsoever to abate greenhouse gas emissions, the worst-case scenario is that global GDP in 2100 would be 8.2 percent lower than it would otherwise be.

Let's make those GDP numbers concrete. Assuming no climate change and a global real growth rate of 3 percent per year for the next 81 years, today's $80 trillion economy would grow to just under $880 trillion by 2100. World population is expected to peak at around 9 billion, so divvying up the total suggests that global average income would come to about $98,000 per person. Today, in comparison, that number is just $11,300.

Under the worst-case scenario, global GDP would be $810 trillion, and average income would be $90,000 per person. Folks two generations from now will be about eight times richer, giving them more wealth and better technologies with which to cope with the problems stemming from a much warmer planet.

Of course, any calculation projecting economic and climate outcomes nearly a century hence needs to be taken with a vat of salt. We can't be sure exactly what will happen—but there is a case for letting global warming run its course and letting markets figure out how to respond.

Continued economic growth and technological progress would surely help future generations to handle many—even most—of the problems caused by climate change. At the same time, the speed and severity at which the earth now appears to be warming make the wait-and-see approach increasingly risky.

Will climate change be apocalyptic? Probably not, but the possibility is not zero. So just how lucky do you feel? Frankly, after reviewing the scientific evidence, I'm not feeling nearly as lucky as I once did.

For more detailed climate change and temperature trend analysis, please visit reason.com/climatedata.