Robert Rubin: Good economic decisions require good data. And to get good data, we must account for all relevant variables. But we’re not doing this when it comes to climate change — and that means we’re making decisions based on a flawed picture of future risks. While we can’t define future climate-change risks with precision, they should be included in economic policy, fiscal and business decisions because of their potential magnitude. The scientific community is all but unanimous in its agreement that climate change is a serious threat. According to Gallup, nearly 60 percent of Americans believe that global warming is caused by human activity. Still, for many people, the effects of climate change seem like a future problem — something that falls by the wayside as we tackle what seem like more immediate crises. When it comes to the economy, much of the debate about climate change — and reducing the greenhouse gas emissions that are fueling it — is framed as a trade-off between environmental protection and economic prosperity. Many people argue that moving away from fossil fuels and reducing carbon emissions will impede economic growth, hurt business and hamper job creation. But from an economic perspective, that’s precisely the wrong way to look at it. The real question should be: What is the cost of inaction? In my view — and in the view of a growing group of business people, economists, and other financial and market experts — the cost of inaction over the long term is far greater than the cost of action. The U.S. economy faces enormous risks from unmitigated climate change. But the metrics we currently use to measure economic growth, fiscal prospects and business earnings do not incorporate these risks. If we are going to have a well-informed and accurate debate about the economic costs of action vs. inaction, the public and private sectors need metrics that honestly reflect climate-related risk. First, future federal spending to deal with climate change is likely to be enormous and should be included in fiscal projections, whether in existing estimates or in additional estimates that include climate change. If nothing is done to prevent climate-related crises, the federal government will be forced to deal with them later — from property losses to public health crises to emergency aid. These huge risks are not currently in official future estimates or federal budget plans. To cover those costs, we will have to increase the deficit; raise taxes; or significantly cut spending on defense, our social safety net, and public investment including infrastructure, education and basic research. Which means that, whatever your public policy views, whether you care about our national debt and deficits, our tax rates, or government investment in everything from national security to job creation, you should care about the costs of coping with climate-related damage. By forcing policymakers to recognize likely future expenditures — and the trade-offs required to make them — we may increase the political appetite for policy changes now. We do not face a choice between protecting our environment or protecting our economy. We face a choice between protecting our economy by protecting our environment — or allowing environmental havoc to create economic havoc. And a major step toward changing the debate is to change the way we measure the health of our economy, our fiscal conditions, and the health of individual companies and businesses to better reflect the world as it will be.
Posted on: Sun, 27 Jul 2014 11:44:06 +0000
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