Is it warm in here? The intractable challenges of climate change David Gerard Lawrence University Honors Convocation May 14, 2015

True or False? Climate change is an urgent problem. It will be extremely difficult to reduce use of fossil fuels. 2 Source: Wagner & Weitzman (2015) Climate Shock

Source: World Bank World Development Indicators (2014) Low Income Middle Income High Income Population (billions) GDP per capita $709$2,826$32,214 Life Expectancy Total Fertility Rate Under Five Mortality Rate (per 1000 births) Agriculture Share of GDP 28101

Source: World Bank World Development Indicators (2014) Middle Income Countries Population (billions) ‘Real’ GDP per capita (US$) 5871,2272,826 Life Expectancy Total Fertility Rate Under Five Mortality Rate (per 1000 births) Agriculture Share of GDP

Growth & the Environment, pt. 1 5 Jeffrey A. Frankel & Andrew K. Rose, "Is Trade Good or Bad for the Environment? Sorting Out the Causality," The Review of Economics and Statistics 87(1): Pollution Concentrations

6 Source: US EPA * GDP per capita up 77% (inflation-adjusted) * SO X, NO X, Pb, PM, CO, O 3 14%

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The “overused”* bathtub analogy CO 2 Emissions Atmospheric CO 2 Concentrations

50 Years of CO 2 Emissions 10 Source: BP 2014 Statistical Review of World Energy World

11 National Oceanic and Atmospheric Administration Atmospheric CO 2 Concentrations 400

12 Stern, The Economics of Climate Change: The Stern Review p o F 3.6 o F 5.4 o F7.2 o F9.0 o F 2090*

13 CO 2 Concentrations and Chance of “Catastrophic” Warming (>11 o F) Atmospheric CO 2 Concentrations % chance Source: Wagner & Weitzman (2015) Climate Shock

The “underused” bathtub analogy Don’t throw out the baby with the bathwater But you still need to do something about that bathwater

15 Stern, The Economics of Climate Change: The Stern Review p %↓ 50%↓

Not Gonna Happen Economic development and energy consumption inexorably linked Fossil energy use increasing (rapidly) Lacks serious political support, even in wealthy countries Wildly optimistic emissions-reductions scenarios are wildly optimistic 16

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18 Electricity Generation (2005) North America (4,895 TWh) Europe (3,495 TWh) Eurasia (1,327 TWh) Asia & Oceania (5,589 TWh) fossil fuels hydro nuclear renewables Source: Data in these pie charts is US EIA Map from Total world in 2005: ~ 17,330 TWh Blocks account for 88% of generation Fossil 66% of world generation

19 Electricity Generation (2012) North America (4,943 TWh; up 1%) Europe (3,581 TWh; up 2.5%) Eurasia (1,479 TWh; up 11%) Asia & Oceania (8,761 TWh; up 57%) fossil fuels hydro nuclear renewables Source: Data in these pie charts is US EIA Map from Total world in 2012: ~ 21,500 TWh (up 25% since 2005) Fossil 67% of world generation Annual growth rate ( ): 5.2% Total world in 2030: > 40,000 TWh

Number of Cities with Populations Greater than 1 Million 20

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Fracking Revolution EPA Counter-Revolution? 23 Reduce U.S. CO 2 Emissions 30% by 2030 Not Global Emissions by 50%+

Fight Climate Change using this One Weird Trick 24

Markets Market Failure Markets don’t treat CO 2 emissions as a cost Put a price on CO 2 ! 25

A carbon tax is less costly means to reduce emissions than other regulatory options 26 Actual text: A tax on the carbon content of fuels would be a less expensive way to reduce carbon-dioxide emissions than would a collection of policies such as “corporate average fuel economy” requirements for automobiles. “The magnitude of the problem is so great that no sufficient carbon tax is feasible worldwide” weighted by each expert's confidence

A carbon tax is ‘better for the economy’ than equivalent income taxes 27 Actual text: Given the negative externalities created by carbon dioxide emissions, a federal carbon tax… would involve fewer harmful net distortions to the US economy than a tax increase that generated the same revenue by raising marginal tax rates on labor income across the board.

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Growth Scenarios for Middle-Income Countries 29 Per-Capita Income (US$)

1993 Nobel Price in Economics Young Social Science Rock Star New Institutional Economics

31 Life Expectancy at Birth + urban whites o urban African-Americans Source: Troesken (2004) Race, Water, & Disease

32 Source: Troesken (2015) The Pox of Liberty

“Good” Institutions Enhance economic development Enable enforceable public policies, such as a carbon tax Facilitate the ability to raise capital to finance large infrastructure investments 33

Take Homes We aren’t going to stop climate change; we can only hope to contain it. Carbon tax, even just in developed world, is one way tool: it could mitigate emissions and provide some insurance against catastrophe. Economic development (fostered by growth- enhancing institutions?) could help improve resiliency of vulnerable populations History provides some examples of extraordinary collective action. 34

Is it warm in here? The intractable challenges of climate change David Gerard Lawrence University Honors Convocation May 14, 2015