Climate change just became solvable because of math

A groundbreaking new paper finds that climate change is worse than we thought — which, bizarrely, makes it more affordable than we thought to fix

Sure, climate change might end life on earth as we know it. But when it comes to fixing it, it’s just too expensive, right?

If this bizarre logic haunts so many of our climate discussions — we become very cheap when it comes to sustaining our own existence — a new paradigm may have just entered the chat.

For years, economists’ best estimates of the cost of climate inaction were giant but not quite big enough to stimulate immediate and adequate action. The cost of inaction was, in a sense, high enough to be terrifying but too low to be galvanizing. But now a groundbreaking new study has raised the estimated cost of inaction by so much that it makes acting seem like a bargain, and even makes it makes sense for wealthy countries to act alone, regardless of what their peers are doing. It’s a rare academic paper that could change everything.

Until the new paper, the most commonly used economic models were predicting climate impacts on the world economy on the order of about $200 in losses per ton of carbon emitted, or around 2 percent of world GDP (the monetary value of everything people produce) per degree of warming. But while those are huge numbers by any measure (world GDP is around $100 trillion), they aren’t big enough to motivate most leaders to justify mitigation, which will also cost a whole lot of money.

To put it in terms the authors use, the recently enacted Inflation Reduction Act will cost Americans roughly $80 per ton of carbon emissions avoided, and while each ton not pumped into the atmosphere would save the world $200 as a whole, it would only save Americans about $40 of that $200, making it feel to some altruistic but not self-evident in purely economic terms.

In their new paper, economists Adrien Bilal of Harvard and Diego Känzig of Northwestern take a fresh look at the data, with results that have the potential to upend conventional wisdom. They show that the social cost of carbon is likely far bigger — six times bigger — than previously estimated: losses of more than $1,000 per ton, or around 12 percent of world GDP per degree of warming. Six times bigger than the previous consensus, those are staggering numbers — roughly equivalent to the economic drag on big economies if they were permanently at war.

Suddenly, that $80 Americans are spending on reducing one ton of carbon emissions is netting them $200 or so in U.S. economic activity. You don’t need to know what anyone else is doing for this to be a good investment.

This is the ray of hope.

Based on the sheer size of those new numbers, Bilal and Känzig argue that it’s very much worth it for countries of means to spend the money now to avoid much greater costs down the line. In fact, the potential losses are so vast it makes sense for these countries to go ahead and act on their own to avoid climate change losses, even if other nations do nothing. The excuse of the collective action problem falls away on this analysis.

Bilal and Känzig’s work has made as big a splash as any economics paper in recent memory, so we reached out to talk about what’s new and different about their approach, how their take on the data led to their striking conclusions, and what they hope decision-makers in government and industry will take away from their work — and hopefully put into action.

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Economists Adrien Bilal (left) and Diego Känzig (right)

Your new paper has gotten a lot of attention for a couple of reasons, the first being that you're talking about an impact six times bigger than most economists have suggested, more in line with what climate scientists have been saying. What’s different about your methodology and how did it lead you to the numbers you've come up with?

Adrien Bilal: So virtually all of the previous work that's been done on the subject has relied on comparisons of different countries that heat up or cool down at different points in time. The U.K. gets a little hotter in one year, and then Germany stays cool. And then you look at how GDP in the U.K. evolves following that change in temperature. And that generally gives you numbers in the vicinity of $150 per ton of carbon emitted and a 2 percent decline in GDP per degree Celsius in warming.

But we think that is quite different from what climate change is actually doing to the world. It's not only that the U.K. is going to heat up a little more than Germany, but the whole world is heating up because of climate change. And, in particular, oceans are also heating up. And when the whole planet warms, that has potentially really different implications for the climate system, increased frequency of extreme weather events that then have big local impacts. 

And so that's actually what geoscientists have been telling us for a long time, but it simply hadn't percolated into economics. And so we took that perspective very seriously and thought, "Well, what happens when we basically compare years where the world is very hot to years where the world is cooler?" And that gives you a much larger effect of climate change on the economy.

So tell me about those findings. And I'm asking you for the explain-it-to-me-like-I'm-five answer.