One might wonder where the Paris Agreement’s 1.5-degree target comes from. Here’s his model’s answer about the level of warming that balances the costs of climate change with the cost of cutting emissions: “t is essentially infeasible to attain the stringent temperature target of 1.5☌… Another finding, much more controversial, is that the cost-benefit optimum rises to over 3☌ in 2100 - much higher than the international policy targets.” In the years since Nordhaus spoke, it has become clear that the world is currently on track for at most 3 degrees of warming, which happens to strike the balance his model recommends. Nordhaus pioneered the study of the economics of climate change. If, for example, attaining the 1.5☌ goal would require deep reductions in living standards in poor nations, then the policy would be the equivalent of burning down the village to save it.” ![]() As Yale climate economist William Nordhaus said in his 2018 Nobel Prize acceptance, “However attractive a temperature target may be as an aspirational goal, the target approach is questionable because it ignores the costs of attaining the goals. The fundamental flaw with the Paris Agreement is that it focuses only on the costs of climate change it doesn’t weigh them against the cost of cutting emissions. One recent article examined 11 studies on the effect of 2.5 degrees Celsius of warming and concluded that “a century of climate change is about as bad as losing a year of economic growth.”Forsaking fossil fuels in a quixotic effort to salvage the Paris Agreement’s 1.5-degree target would cost far more. That means that instead of global GDP increasing 2 percent per year, it would increase 1.95 percent.Įxpert consensus on the low cost of climate change is startling, given apocalyptic statements from media and politicians. Their conclusion? Due to climate change, people in 2100 are expected to earn 3 percent less than they otherwise would, although thanks to economic growth they will likely still be far more prosperous than we are today. To assess the cost of this level of warming, look to the IPCC’s own analysis of twenty studies. But forecasts have since become more optimistic: today, the UN and independent climate trackers agree the world is on track for only 2 to 3 degrees of warming above preindustrial levels. A few years ago, scientists warned of global warming of 4 or 5 degrees Celsius, an alarming prediction because the expected damage of climate change rises exponentially along with warming. ![]() Scientists now agree the world is on track to avoid catastrophic warming. But the expected cost of climate change is likely lower than net-zero advocates claim, and the cost of slashing fossil fuel use is most likely higher than they acknowledge. ![]() These proposals have no clear connection to increasing shareholder value, so shareholders should oppose them.Īctivists often appeal to the claim that climate risk is investment risk. They ask for radical changes in short time frames without regard to financial discipline. They’re usually disconnected from companies’ missions and could require them to sacrifice their customers’ interests in pursuit of a political goal. ![]() These net-zero proposals are motivated by environmental concerns, not financial ones.
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