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The Economic Case For Greta Thunberg

A young “Climate Warrior” sails into New York with a powerful message.

Christopher Columbus in 1492 found some evidence supporting the theory that the Earth is actually round. (Pythagoras “a few years prior” delivered the theory and the testable hypothesis.)

This week another European is crossing the Atlantic by sailboat in order to draw attention to the fact (it’s no longer a theory) that humans are changing the climate. She will sail into New York tomorrow. Her name is Greta Thunberg. She is a 16 year old Swedish woman, who will likely speak at the UN climate summit in early September.

The reporting on her efforts in the US press have been scant, so here is roughly what she has done so far. She started a movement called “school strike for climate”, where she skipped school on Fridays to protest outside the Swedish parliament in favor of action on climate change. This has led to a widespread movement called “Climate Fridays”. On May 24th of this year 1.4 million students in 125 countries followed her example. This drew a lot of attention and she has given a TEDx talk, spoken at the 24th UN Climate Summit in Poland, The World Economic Forum in Davos, etc.

Her speeches are calls to action. One of her most widely cited quotes is that, “I don’t want you to be hopeful. I want you to panic. I want you to feel the fear I feel every day. And then I want you to act. I want you to act as you would in a crisis. I want you to act as if the house was on fire—because it is.” She has also cited a number of the recent findings by the Intergovernmental Panel on Climate Change (IPCC), backing up her call for urgent action.

Looking at my Twitter feed, there are many snarky reactions by reporters, a bunch of snarkier economists and other social scientists belittling her efforts. The arguments usually go something like this:

Kids should stay in school and learn and then when they are well educated effect change. Awesome. We and the generations prior to us did that and have you looked at the state of the world around us?

She is creating an unjustified degree of panic. The house is not on fire. We have plenty of time to fix the climate change problem. Read an IPCC report or two. If you don’t like reading on a screen, I’ll send you a signed paper copy. We do not have much time left to act.

She claims that we know what it takes to fix the problem. Well, we sort of do. Some mix of carbon pricing and (deep breath in) technological and possibly input standards will do the trick, or at least get us well on our way.

Her sailboat trip is a media gimmick that is actually more carbon intensive than if she had flown in. That is not the point. She is not arguing that everyone should switch to sailing across the Atlantic, but rather make us think about whether trips are necessary and, if they are, to take the least carbon intensive mode.

Finally, there may be a media firm or a green technology firm behind her campaign. Well, that is just outrageous! Fossil fuel companies don’t do that at all, right? They do not hire lobbyists, advertising firms and plain old bribes to get their way! Come on. Let’s not be ridiculous. Should we require that all kid activists fund their campaigns from money they earn from their lemonade stands, while fossil fuel companies get to employ their generous government sponsored subsidies and tax break money?

Ok. Stop ranting Max. What about the economic case for Ms. Thunberg’s campaign that the title of this blog post promised. I think there are three straightforward arguments that are pretty much in any decent economics textbook.

  • In order to fix market failures from negative externalities, one can employ our favorite pricing strategies (like a tax or cap and trade), and emissions standards (which limits the amount of pollution) and/or use something called moral suasion. Moral suasion is essentially what your grandparents have taught you and is often called “doing the right thing”. Ms. Thunberg is making a strong case in support of the point that we are failing her and future generations and that this is not consistent with the values we, supposedly, have regardless of faith. She reminds us of this very effectively and politicians across the world have taken notice.
  • In economics the welfare of future generations is usually captured by a single number – the discount rate. In our super nerdy models, we assume that society exists into infinity and that individuals in each year get welfare from being alive and consuming goods and services. We discount (that is, put less weight on) the well-being of future consumption – and hence generations – by choosing that discount rate. The higher the rate, the less weight is placed on your great grandchildren. There is a battle raging with the econ equivalent of a folding chair match between “The Rock” and “Hulk Hogan” about how to do this right. Greta Thunberg does not have a favorite discount rate or method, but lends a face to this parameter. The future is a lot less personable when it is expressed in a Greek letter, compared to the face representing future generations. How much weight we place on the future in practice may depend greatly on how important politicians feel the future is.
  • Greta Thunberg may well be an important focal point in the problem of solving the climate dilemma. When people are asked about the issues that concern them, the environment often comes out at the very end of a top ten list. Her visibility achieves two things in my view. First, it draws attention to the climate problem, as the media campaign she has started is first rate. Second, solving the climate problem has suffered historically from a lack of coordination as countries have had a really hard time agreeing on what we will really do to address this challenge. Rallying behind Ms. Thunberg’s call for action at the UN in a few weeks may just do the trick – especially if the youth of the world are behind her.

It is easy to belittle others. It is easy to raise your nose and argue that Ms. Thunberg does not understand the subtleties of carbon pricing (neither do most economists, I would argue). But she has never claimed to be a climate scientist or economist. She is standing on top of a very large mountain of science and telling us to pay attention to this issue. The house is on fire. If you don’t believe me, I leave you with the picture below.

 

 

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation: Auffhammer, Maximilian. “The Economic Case For Greta Thunberg”, Energy Institute Blog, UC Berkeley, August 26, 2019, https://energyathaas.wordpress.com/2019/08/26/the-economic-case-for-greta-thunberg/

 

 

Maximilian Auffhammer View All

Maximilian Auffhammer is the George Pardee Professor of International Sustainable Development at the University of California Berkeley. His fields of expertise are environmental and energy economics, with a specific focus on the impacts and regulation of climate change and air pollution.

26 thoughts on “The Economic Case For Greta Thunberg Leave a comment

  1. The US media is complicit in keeping Greta’s incredible global movement quiet. This is one of the biggest issues and one of the biggest stories in it, and it deserves front-page coverage and top-of-the-hour headlining.

    There is a simple economic case for the carbon fee and dividend policy solution. It will be highly effective as well as efficient in reducing emissions. This is supported by thousands of Economists including most of the leading economists of our time: clcouncil.org/economists-statement/.

    The policy is now a bipartisan bill in Congress and it deserves everyone’s careful consideration and support: energyinnovationact.org/.

    In addition to rapidly reducing emissions, the dividend provides many co-benefits to low-income households and the economy as well: citizensclimatelobby.org/remi-report/.

  2. Richard
    I agree that economists too often overlook the importance of property rights. I’m curious when you say the discount rate becomes “moot” in the overlapping generations model, do you mean that for mathematical purposes, it’s zero? And what set of assets for which is this applicable?

  3. Max,

    Thank you for this post.

    I’m trying to figure out exactly what the Economic Case is that Greta Thunberg taught us by using a sailing boat to travel from Europe to the United States.

    I’m absolutely confident that there will be zero cases of Energy Institute faculty using sailing boats to perform international travel from the U.S. to Europe during the coming decade, and that all of our UCB/Energy-Institute faculty will end up using airplanes to travel to their international conferences, not sailboats. Please prove me wrong and point me to UCB/Energy-Institute faculty who plan to use sailboats for their international travel.

    When my grandfather immigrated from Sweden in 1910 the ship was fossil powered, which was far better than the wind-powered technology that created horrible human suffering in the 1850’s immigration from Sweden (described in Vilhelm Moberg’s novel, “The Emigrants”). Shortly after he was naturalized, my grandfather was then drafted and sent to France. He refused to talk about that experience with his children.

    I’m copying Lucas because I cannot figure out how or why the Energy Institute is lauding sailing as a mode of international transportation. We currently have a president who is great in performing reality TV stunts. Sailing from Sweden to the U.S., with a crew that will fly back, appears to fall inside the reality TV genre that our current president is skilled in. As you state, “the media campaign she has started is first rate”. The same can be said, objectively, for our current president.

    It is not truthful to state that sailing is a viable technology for international travel or commerce. Sailing is a reality-TV stunt, including the photo. I’m sad.

    I might be wrong, and there might be some Energy Institute faculty who are planning to sail to their next international conference. If so, let me know.

    -Per

  4. A ‘simple way’ of looking at NEGATIVE actions. When you INVEST something and expect POSITIVE outcomes you use a DISCOUNT model to understand NPV. But when you have actions [disinvestment? or bad actions], the future impact is MULTIPLICATIVE/ exponential.

    There needs to be a ‘negative’ discount rate which captures the INCREASING damage in the future of CURRENT ‘bad actions’. So an action TODAY has a damage of 5% TODAY, but next years is it [(1+.05)^2-1] ie 10.25%, and 50 years later is [(1.05)^50-1] ie 1046%. Check this out with your models. Of course the ‘impact’ today might be 1%, and in 50years would be 65%.

  5. Humans are changing the climate, but by how much? Years ago, the IPCC asserted that most scientists agree that humans are causing most of climate change. Leaving aside selectivity issues, this is consistent with the anthropogenic contribution to climate being 40% or even less, averaged across scientists.
    A later report said that it is “extremely likely that more than half of the observed increase in global average surface temperature” from 1951 to 2010 was due to human activity. But likelihood is based on an arbitrary selection of computer models.
    A distinguished solar physicist (and founding director of the Big Bear Solar Observatory) suggests that if you put solar activity along with the (very different) absorption and reflectance properties of high and low clouds into the model, the anthropogenic contribution would fall to well less than 50%. And that is only a first step because the role of the sun in cloud formation circulation patterns is not well understood. But even if this study were funded and eventually included in the IPCC report, it would still be drowned out by the other models.
    There are also models that support a human contribution of more than 100%.
    Selectivity issues in the IPCC, funding sources, and journals should make us skeptical about many of these asserted confidence bounds. Didn’t you publish an article with Brian Wright about doing confidence estimates using ice core data?

    • That one was a technical paper about confidence intervals in reconstructions. Not going forward. And we said nothing about the human contribution. You should look at Richard Muller’s work, who is a physicist (former doubter) and has done a ton of work on this.

      • Thanks, Max. Muller was initially skeptical that the earth was warming and convinced himself that it is. His assertions about cause are less convincing. He seems to put a lot of stock in the correlation between CO2 and temperature, but has he dealt effectively with dual causality (CO2 driving temperatures vs. temperatures driving CO2)? He rejected solar activity as a significant cause because it is not well correlated with warming. But as far as I can see, he did not take up the theory that solar activity must be mediated through cloud formation and the differential net reflectivity between high and low level clouds, nor how the combination affects circulatory patterns.

          • The abstract seems to indicate a fairly constant reflectance after 2000 (and the increased reflectance after 1998 is consistent with 1998 being a previous peak “hot” year for a decade.)

            Earthshine and FD analyses show contemporaneous and climatologically significant increases in the Earth’s reflectance from the outset of our earthshine measurements beginning in late 1998 roughly until mid 2000. After that and to-date, all three show a roughly constant terrestrial albedo, except for the FD data in the most recent years

          • Richard,
            Thanks for you thoughtful comment. My impression is that the increased percentage of high level clouds (as well as their mass/volume) should be taken into account, not only for reflectance but because of their heat trapping characteristic.
            Prof. Goode is also seeking to understand the behavior of the polar vortex including how and why it changes cloud cover.
            Jim

          • I’d be interested to see if they have quantified the impacts of those effects. That’s the most important question. The lack of correlation with the temperature trend is an issue unless they show substantial latency and/or inertia.

        • Max/Richard,
          It’s all about the clouds. There are three primary drivers of climate change: incident sunlight, the Earth’s reflectance (albedo) back to space, and the greenhouse effect. The albedo depends primarily on cloud properties. Moreover, the greenhouse effect of clouds needs to be distinguished from that of anthropogenic gases. “However, clouds are very poorly parameterized in climate models,” in particular the increased proportion of high-level (more absorptive) clouds (Palle and Goode). We know from the late M. Weitzman that uncertainty is not an excuse for inaction. The issue is whether there has been a systematic overemphasis of what science understands to the neglect of what is doesn’t.
          Jim

          • Hey Jim:

            I am about as comfortable to have economists do climate science as I am about climate scientists doing economics. I have to rely on the IPCC synthesis. The degree of review and rigor is quite amazing.

          • Hopefully the IPCC will do a better job of studying the changing composition of high and low level clouds and their properties in the not too distant future. In the meantime, there are several articles by the experts (E. Palle, Philip Goode, and their co-authors) that are available online. Their 2004 Science article is quite readable. One could progress to the more recent pieces from there.

  6. In the dominant climate economic analyses, the discount rate “captures” future generations in a growth model that assumes an infinitely-lived agent. This often used model does not even include the rights of future generations. A quarter century ago, Richard Howarth and I showed that if you use an overlapping generations model that actually includes future generations and you care about future generations by giving them environmental rights, then the whole question of what is the appropriate discount rate becomes moot. Economists have models in which they can show how the economy would efficiently work will expressing our care for future generations. Instead, economists have stuck with an inappropriate way of analyzing the problem to determine what the public “should” do about climate change. Greta is also telling economists to respond to this crisis with appropriate economic frameworks of analysis.

    • Thank you for this excellent piece on Greta Thunberg and her efforts to communicate the urgency of the climate crisis. To illustrate your argument that traditional economic energy modelling is failing to incorporate this urgency, look no further than the California Public Utility Commission, which just postponed incorporating the cost of health impacts of fossil fuels into their cost effectiveness modelling for another two or more years (Decision 19-05-019 May 16, 2019 ) Not only that, the CPUC seems inclined to accept the investor owned utility arguments that the discount rate should be the IOU “cost of capital” rather than a Societal Discount rate (such as 1.4% as proposed in the Stern Report on climate change) — implicitly valuing investor ROI over the cost to California residents, let alone future generations.

  7. So where is the claimed economic case? Unless Ms. Thunberg has discovered new science, all the reports to date (100%) conclude that implementing all proposed initiatives would not materially change the IPPC claimed climate impacts.

    • She is sailing into New York today. If you look at the New York times front-page, there are _zero_ mentions of this right now. If you look at pretty much any German (those are the ones I read) newspaper, this is a headline. As for your comment about my reading, I of course spent most of my time reading knitting magazines and cartoons.

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