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Climate change fight makes economic sense

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Failure is a painful teacher, but an effective one.

Knowledge comes from seeing past missteps clearly. But we won’t learn the lesson failure offers unless we acknowledge what is going wrong.

And right now most of the other nations of the world, if not our entire human civilization, is refusing to see its folly when it comes to climate change and the challenges it poses.

We could rightly view this as a scientific challenge, a moral challenge, even one of national security. But there is utility and a persuasive argument for viewing this in economic terms — in the dollars and cents we all stand to lose if we fail to learn, and learn fast.

With budget and fiscal issues top of mind in the build-up to this year’s State of the Union address, I urge President Barack Obama to call on the new Congress to step up and grasp this opportunity: spur economic growth by addressing climate change and avoid the economic disaster if we ignore it.

Too often we focus only on what it will cost to act.

Last month, the World Economic Forum estimated it would cost an additional $700 billion a year to curb the risks of climate change, a sum that includes a mix of public spending and private investment on renewable energy and energy efficiency. When Congress last sought a legislative solution, obstructionists labeled it an "energy tax" and distorted an analysis to focus only on the costs, not the benefits.

But we all know choosing not to act carries a price tag, too.

The last landmark global effort to calculate that price tag was by British economist Sir Nicholas Stern in 2006. Stern concluded that failure to curb climate change would range from five per cent of GDP, or $3.45 trillion a year (at today’s economy), up to 20 per cent GDP, or $13.8 trillion a year.

And actually curbing climate change? Stern concluded that would cost one per cent of GDP, or $69 billion a year.

Is it worth spending $69 billion to save $13.8 trillion? Or to put it in pocketbook terms, is it worth spending 69 cents to save $138? The answer is clear.

Changing our energy system will cost us up front, but any fair analysis will calculate the benefits ahead. Our health will benefit from energy that does not damage our climate, our food supply will benefit from a climate that does not suffer severe disruption, our modern infrastructure will survive without the extreme weather climate change delivers.

The path we must follow is clear, though it will pose many, many challenges, from developing better renewable energy technologies to walking away from carbon-polluting fossil fuels. But the status quo is not an option.

Climate change has been called the greatest failure of the market system. Fossil fuels remain cheap because the cost of resultant pollution is not calculated according to its true price. Too many economists diminish the urgency of action by discounting the value of future benefits. These are failures we can fix.

Stern’s analysis is now seven years old, and in those seven years we have seen record-breaking wildfires in the American West, catastrophic drought in the Plains, and the hottest year ever recorded in the U.S. — 2012. The first decade of the millennium was the hottest ever recorded globally — edging out the last decade of the last millennium, which in turn beat the decade before it. The trend is clear.

We need a new, cutting-edge economic analysis that integrates the latest climatic data, so we can clearly see the costs of change and the costs of inaction.

But in the short-term, President Obama can be a leader on calling for that analysis, and calling for all of us to be honest about what we stand to lose if we don’t start accepting the true costs of climate change.

In his inaugural address, Obama promised action on climate change, and we all must hold him to that promise. None of us can afford thefailure to live up to that vow.

 

Kristen Sheeran is an economist and executive director of the Economics for Equity and the Environment Network for Ecotrust, based in Portland, Ore.

 

—McClatchy Tribune Services

 

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