Written by Caroline McMahan
Nations around the world are grappling with the cost of moving industries towards more sustainable production methods. Implementation of regulations and taxes geared towards limiting greenhouse gas emissions has been met with backlash from people and corporations who are content to continue burning through the Earth’s natural resources at the rate and price the world is accustomed to. However, the question that should be asked is what is the cost of the alternative – continuing to produce at the current global level.
Warming temperatures, rising sea levels, and an increase in extreme weather events are putting pressure on infrastructure and resources. Inconsistent rainfall and hotter temperatures are severely reducing agricultural production. Flooding is forcing communities to relocate and halting work in factories. Industries such as fishing and tourism that depend heavily on natural resources and optimal climate conditions have been increasingly hurt. Extreme weather events, such as the fires seen in Australia and California, are expected to become more common, leading to more human deaths and disruption of international trade. Rising temperatures will reduce the efficiency of power generation, leading to higher electricity costs (USGCRP, 2018). The price tag on climate action is high, but the price of ignoring the problem continues to grow.
The leading environmental goals proposed come with their own lofty costs. In the United States, the divisive Green New Deal has been proposed as one of the strongest and most broad climate change legislation propositions. With the main goal of decreasing carbon emissions to net zero and transferring 100% of energy to be drawn from zero-emission sources, the Green New Deal allocates money towards renewable power sources, investments in communities impacted heavily by climate change, and improvements in infrastructure and sustainable transportation systems. The American Action Forum estimates the Green New Deal could cost $93 trillion dollars in the first ten years (The Congressional Western Caucus, 2019). Even with some realistic cuts, economist Noah Smith approximates the Green New Deal to cost 6.6 trillion dollars per year, almost three times as much as the federal government collects in tax revenue (2019). While the price of continuing to ignore climate change is projected to grow rapidly on itself, the cost of building the future of the global economy is heavily frontloaded, requiring massive amounts of money to be spent in undoing environmental damage of the recent past and in rewiring the infrastructure, power sources, and transportation of nearly all industries to create a greener future.
China has experienced some of the most visible symptoms of climate change with the extreme air pollution seen in major cities. Responsible for more than a quarter of the world’s total carbon dioxide emissions, China has had severe air pollution shut down schools, factories, and roads for days at a time (Evans, 2017). Sea level rise and warming temperatures have caused extreme weather events such as floods, droughts, and storms in recent years that have caused economic losses of 25 to 37.5 billion dollars per year (JGCRI & BMI, 2009). The National Intelligence Council maintains that “by the second half of the 21st century, climate change could cause reductions in yields of rice, maize and wheat of up to 37 percent” (2009). For a nation whose economy relies heavily on its coastal cities and agriculture, China can expect droughts, storms, and other climate-induced weather events to put increasing strain on its economy.
In the United States, the progress of climate change is expected to begin affecting American industries in it’s insidious degradation of land and natural resources. Climate change has already begun and will continue to increase water scarcity in dry regions, creating more wildfires, and cause flooding due to melting ice and rising sea levels in wet regions. The US is heading towards massive crop failures due to hotter temperatures and inconsistent rainfall. The most recent National Climate Assessment evaluates that the United States can expect 141 billion dollars in heat related deaths, 118 billion dollars from sea level rise, and 32 billion dollars from infrastructure damage by 2100 (Davenport & Pierre-Louis, 2018). The National Climate Assessment estimates that 10 percent of American gross domestic product will be slashed by 2100 with current climate measures (2018). Looking at pre-pandemic 2019, a 10 percent drop in present GDP would see 2.14 trillion dollars lost to global warming. The estimated cost per year of the Green New Deal still stands at over three times the value of GDP estimated to eventually be lost to global warming, but a cap cannot be placed on the potential value of the transition to sustainable production.
Two market-oriented policies economists agree would help curb rising emissions are tradable permits and emissions taxes. Tradable permits allow a government to set a specific cap on total emissions and auction off the necessary amount of pollution permits to keep emissions under the target (USEPA, 2021). Firms would be forced to reduce emissions as it becomes more cost effective to make sustainable changes and minimize the amount of money they are spending on pollution permits. Emissions taxes work in a similar way with firms who are producing emissions at a certain level being required to pay taxes on their pollution or reduce emissions. These two policies incentivize firms to create their own solutions to reducing pollution instead of putting responsibility on specific government regulations. Furthermore, there is no bottom line to these policies as firms can work continuously on reducing their emissions to be subject to less financial penalties. The future of the shift towards sustainable production lies in placing responsibility on individual firms and industries to build a future humans, the earth, and the global economy will benefit from.
References
The Congressional Western Caucus. (2019). Green New Deal Costs. https://westerncaucus.house.gov/uploadedfiles/costs_of_the_green_new_deal.pdf
Davenport, C., & Pierre-Louis, K. (2018, November). U.S. Climate Report Warns of Damaged Environment and Shrinking Economy. The New York Times. https://www.nytimes.com/2018/11/23/climate/us-climate-report.html
Evans, S. (2017, May). Mapped: Climate Change Laws Around the World. Carbon Brief. https://www.carbonbrief.org/mapped-climate-change-laws-around-world
Joint Global Change Research Institute & Battelle Memorial Institute, Pacific Northwest Division. (2009, April). China: The Impact of Climate Change to 2030. National Intelligence Council. https://www.dni.gov/files/documents/climate2030_china.pdf
United States Environmental Protection Agency. (2021). Economics of Climate Change. https://www.epa.gov/environmental-economics/economics-climate-change
USGCRP, 2018: Impacts, Risks, and Adaptation in the United States: Fourth National Climate Assessment, Volume II [Reidmiller, D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.